Dominique L. Casimir, Shane A. Pennington, Elizabeth N. Jochum, and Amanda C. DeLaPerriere ●
The Small Business Administration (“SBA”) began demanding repayment of grant funds distributed to more than 600 businesses under the COVID-era Shuttered Venue Operators Grant (“SVOG”) Program in June 2025. The purpose of the SVOG Program was to provide emergency assistance to eligible businesses that organize, promote, produce, manage, or host live performing arts events. To be eligible for a grant under the SVOG Program, grantees had to submit extensive documentation satisfying the eligibility criteria under 15 U.S.C. § 9009a. Years later, well after the SBA determined that applicants were eligible for grant funds, and well after the approved grantees spent their grant funds as required under the terms of the grants themselves, the SBA is reversing en masse hundreds of it its own prior eligibility determinations and demanding repayment of grant funds in full, with potentially catastrophic effects for grantees.
In February 2026, the SBA began issuing a new wave of first-time demand letters to grantees, questioning their eligibility and providing limited appeal rights, signaling that this issue is not going away anytime soon. In its responses to affected grantees, the SBA appears to be making a distinction between whether the grantee companies are “vendors” to live shows as opposed to being responsible for organizing, producing, and promoting them. We see several issues with the SBA’s approach, including that 1) the SVOG statute does not include language to support the SBA’s position regarding “vendors,” and 2) more fundamentally, that the SBA may lack the requisite legal authority to arbitrarily reverse its own prior eligibility determinations in an attempt to claw back millions of dollars in already-disbursed grant funds.
So, what should SVOG grantees do if they receive demand letters from the SBA or exhaust ongoing communications with the SBA regarding previously received demands? First, affected grantees must act quickly to assess their legal rights and options. We recommend:
- Grantees work with counsel to develop an approach to the SBA’s demand letter, including whether to engage with the process by attempting to submit additional documentation to the SBA to reinforce eligibility. This approach can buy some time, help to build a more favorable administrative record, and even result in the SBA closing its inquiry.
- Grantees and their counsel should consider seeking judicial review, given the concern that the SBA’s re-do of its own prior eligibility determinations may be impermissible under the Administrative Procedure Act.
With strict response deadlines and millions of dollars at stake, grantees facing SBA demands should promptly engage legal counsel to protect their interests and evaluate all available remedies.