Bankrupt hospitals can apply for Paycheck Protection Program loans, courts rule

The Small Business Administration can't block three bankrupt hospitals from applying for a Paycheck Protection Program loan, federal courts ruled this week, according to two publications. 

Several rural hospitals, including Springfield (Vt.) Hospital, Calais (Maine) Regional Hospital and Lincoln, Maine-based Penobscot Valley Hospital, filed lawsuits last month against the U.S. for blocking financially troubled companies from accessing the loans.

The hospitals argued that businesses restructuring under Chapter 11 should have access to the loans. Businesses want the funding because the loans don't have to be paid back if they are used for employee pay and meet other requirements.

The SBA said when rolling out the program that that providing Paycheck Protection Program loans to bankrupt companies "would present an unacceptably high risk of unauthorized use of funds or nonrepayment of unforgiven loans."

All three hospitals can now apply for the loans after bankruptcy judges granted them a temporary restraining order against the SBA, according to two separate reports from Bloomberg Law and WABI-TV.

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