Recently, the Small Business Administration (SBA) began issuing letters to recipients of grant funds under the $16.25 Billion COVID-era Shuttered Venue Operators Grant (SVOG) program, rescinding grant recipients’ eligibility for the program and demanding full or partial repayment of the grants. In many cases, the notices were a shock to grant recipients who went through multiple rounds of the grant approval process and received audit approval for their use of grant funds. Now, they face a daunting 30-day deadline for repayment of hundreds of thousands or even millions of dollars the company no longer has. Companies that received grants under the SVOG program should be prepared to timely appeal and, if necessary, litigate SBA rescission letters in order to preserve the companies’ rights to the funds and the companies’ financial bottom line.
Background
The now-defunct SVOG program was enacted by Congress in 2020 to provide emergency assistance to performing arts organizations, live venues, museums, theaters, and other entertainment companies and venues that were impacted financially by the COVID-19 pandemic. The program, which was administered by SBA, allocated grants of up to $10,000,000 to eligible applicants to help those businesses survive the pandemic when patrons were unable to attend performances in light of quarantine and stay-at-home orders. Of the over-10,000 grant recipients under the program, over 3,000 grant recipients received at least $1,000,000 in funds and over 5,000 received at least $500,000, funds that offered a lifeline to struggling entertainment businesses during an unprecedented time.
For initial awards issued under the program, recipients could use funds on eligible expenses incurred from March 1, 2020 through December 31, 2021. For supplemental awards, companies could use the funds to pay for eligible expenses incurred through June 30, 2022. By the end of 2022, almost all grant recipients spent all grant-related funds in order to keep their companies afloat, meaning the funds are no longer available to grant recipients or to repay SBA.
In December 2022, Congress de-obligated all unused funds in the SVOG program. Despite the significant passage of time since the end of the program, in June 2025, SBA began issuing rescission letters to certain grant recipients claiming they were never eligible to receive the grants in the first place, or they had received excess grant funds, and demanding full or partial repayment within 30 days. The letter is heavy on threats and light on detail, referring to the basis for rescission only generally. In many cases, the basis cited in the letters is incorrect, or the letters came after SBA previously approved the companies’ grant-related documentation and confirmed their eligibility for the program.
Approximately 600 grant recipients are estimated to have received letters from SBA so far and now face demands to repay up to $10,000,000 in previously-spent and no-longer-available funds. These demands, if paid, would cripple these companies and further damage an industry that still has not recovered from the pandemic.
Remedies
But all is not lost for companies facing SBA rescission decisions. There are avenues for appeal that each company should follow in order to ensure the best opportunity to retain the funds SBA now seeks to claw back.
- Appeal to SBA. Each SBA letter discloses the recipient’s right to appeal the decision directly to SBA: “If you wish to contest the validity or amount of this debt, you may submit a request for reconsideration through the SVOG Portal within 30 calendar days from the date of this letter.” This process is critical because in any future litigation arising out of SBA’s decision, the recipient is very likely going to be limited to the arguments and evidence submitted to SBA as part of the original grant application process and through the appeal. If an argument is not made or evidence is not presented to SBA at this stage, it may be lost forever, hampering a future court’s ability to rule in the recipient’s favor. Grant recipients who have received rescission letters should, without fail, exercise their rights of direct appeal within the 30-day period in order to challenge the decision. This process should be completed with the help of an attorney. Retaining competent counsel with an understanding of the SVOG program’s standards and requirements is important to preserving the recipient’s best chances for success.
- Litigation Under the Administrative Procedure Act. Even if SBA denies a direct appeal, a grant recipient can seek neutral third-party review in federal court. Decisions on SVOG grants and appeals are considered “final agency action,” and thus, they are subject to judicial review under the Administrative Procedure Act (APA). In any APA suit, the recipient must prove that SBA’s rescission decision was arbitrary, capricious, contrary to law, an abuse of discretion, or not supported by substantial evidence. This is a high burden for a recipient to meet, as the standard provides substantial deference to the agency’s decision-making. However, federal courts have been somewhat receptive to arguments attacking SBA decisions under the SVOG program to date. Courts also may be skeptical of SBA’s decision to rescind hundreds of grants, with little explanation, after previously deeming those companies eligible for the program, and where grant recipients submitted substantial documentation to support eligibility and fully disclosed the companies’ procedures and operations. Where grant recipients can prove their eligibility, including through documentation previously submitted to SBA, they will give the court strong reasons to overturn SBA’s rescission.
To be sure, SBA’s rescission letters are a significant threat to the financial well-being of grant recipients. Knowing and exercising appeal rights can help grant recipients confirm they are and always have been eligible for the SVOG program and avoid a sizable repayment obligation that could put the company in serious jeopardy.
If you have questions about the Initiative and potential impacts on your business or other FCA-related matters, please contact Matt Feinberg or another member of PilieroMazza’s Litigation & Dispute Resolution Group.
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