This week, according to the Small Business Administration, all 15,429 applicants for the federal Shuttered Venue Operators Grant program will know whether or not they were approved for funding intended to cover expenses incurred over closures lasting more than a year during the pandemic. Of the more than $16 billion set aside for the grant, as of Monday (Aug. 2), more than 10,400 live music businesses have been approved for almost $8 billion.
Another 2,993 applications — or nearly one fifth — were declined.
The SBA has not provided those applicants with any reasons for declination, which it tells Billboard is due to its effort to expedite the process of decisioning applications. That’s frustrated business owners, however, and those who have inquired with the SBA about the reasoning for their declinations have received an email referring them to “an eligibility matrix, including some common reasons an entity is found ineligible.”
Many music venues, promoters and talent agencies have been without revenue for 16 months, and the grant program was a lifeline for businesses struggling to pay rent, insurance and other expenses. Despite being signed into law in December, not a single application was accepted by the SBA until four months later, after a failed portal launch and technical issues. For a full month after submitting their applications, applicants heard nothing back from the administration that was tasked with the first-of-its-kind grant program, which was designed to benefit a wide range of qualifying businesses. A slow rollout of awards finally began at the end of May.
“I spent 250 hours of my own manpower getting my documentation together, having to go through getting all the documents from promoters, getting all of our blueprints and all our schematics for the sound and lighting. It was just a lot of paperwork,” says Daniel Maris, owner of Kaos Productions and Spin Nightclub in San Diego, who was declined for the grant. “Our decline sent a big shockwave through the system because everyone was like, ‘If you’re not awarded, what in the world is going on here? You’re a venue through and through.’”
Maris is a member of the National Independent Venue Association — which helped lobby for the bill’s passage — and Spin regularly hosted DJs and live bands on Fridays and Saturdays prior to the pandemic. In order to reopen Spin earlier this month, he had to take out additional loans since the grant money had yet to materialize.
Like many of the companies that were declined, Maris doesn’t know the exact reason why his business wasn’t accepted. The SBA’s senior advisor for COVID-19 programs Deidra Henry-Spires tells Billboard that the eligibility matrix, or the “Why your Shuttered Venue Operators Grant application is ineligible” document, is what the SBA is currently providing for those declined as they focus their efforts on reviewing applications.
“There is a balancing act we have to do. The level of specificity slows things down,” Henry-Spires tells Billboard. “There are conversations we can have after we’ve seen the whole unit of declines once we’ve gotten through [all the applications that came in the first 60 days]. But often in grant programs, you don’t get a personalized reason for your declination.”
In a complicated program like the SVOG, there are a number of reasons why a venue or live music business could be found ineligible. The eligibility matrix alone is 11 pages, and some definitions, such as that for “live performers,” can be unclear. Despite being ineligible according to the matrix, several escape rooms have been awarded funds, as well as at least one strip club in Louisiana.
“There was this topic floating around that they don’t think DJs are live performers. That could be true. There is some legitimacy to that,” says Maris. “But there are some venues that do only DJs that were approved. Not many, but some. It’s all over the place. It is literally 50/50 roll the dice at this point.”
For Maris, as well as the Music Room in Atlanta and Vue Seattle, a major concern is tax codes. When Keiran Neely and Mike LeSage took over the Music Room, its top floor was a pizzeria. They closed the restaurant a few years later, but kept the LLC of Edgewood Pizza Parlor to avoid having to reapply for a liquor license. Their tax code continues to be for a restaurant.
“In the city of Atlanta, any establishment that wants to be open on a Sunday has to be coded as a restaurant regardless of if you’re a club or not,” says Neely. “We know one of our competitors, who was open the whole time even during the shutdowns, got close to $3 million. They have the same exact code on their tax returns.”
Chuck Wang has been running nightclubs in Seattle for 15 years and applied as a priority one (a business that lost 90% or more of its revenue in 2020) for the SVOG. Wang says his space, Vue Seattle, was one of the first 250 declines and, after contacting senators and congress members to help him get a reason from the SBA, he finally got a response.
“I believe that we are the only entity in the state that actually got a reason, a written email, for why we were declined,” says Wang. “They basically said they cannot tell whether we are a restaurant or a nightclub. Which tells me they didn’t read the 20 pages of supporting documentation.”
According to Wang, in order to sell liquor before 4 p.m. in Washington he needed a restaurant license. As a result, Vue has a small kitchen for the restaurant tax code, but also pays insurance for being a nightclub. “For nightclub insurance I am paying $40,000 a year because of liquor liability. I would love to pay the restaurant insurance rate because that is a lot cheaper,” says Wang.
It is unclear how many of the 2,993 declined businesses believe they were incorrectly deemed ineligible for the grant, but the SBA says they will begin accepting appeals today (Aug. 2). Those who were declined should expect an email from the SBA, after which they can begin the process of uploading a statement in defense of their eligibility along with supporting documents.
“The only way we’ll ever get our doors back open is by getting this grant,” says the Music Room’s LeSage. “If we don’t know what the problem is, are we just going to submit something with the same issues? It’s scary when your entire livelihood and your family’s livelihood are wrapped up in this.”
For those entities appealing declines, the SBA’s Henry-Spires says a different review team will look over the application again and give an “opportunity under a new set of eyes to see if we made a mistake, if something else should have been done or you should have received an award.”
Henry-Spires adds that the appeals process was not written into the statute for the bill, but was created due to urging from stakeholders. It’s a “second opportunity to plead your case with strong financial documentation that makes a good case for the American taxpayer, because we take our duty to protecting their funds incredibly, incredibly, seriously.”