Bankrupt rural hospitals suing feds to access loans to cover payroll

A growing number of financially troubled companies, including rural hospitals, are suing the Small Business Administration for blocking bankrupt companies from accessing Paycheck Protection Program loans, according to The Wall Street Journal.

At least a dozen lawsuits have been filed in the U.S., arguing that businesses restructuring in 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. 

Several rural hospitals — Springfield (Vt.) Hospital, Calais (Maine) Regional Hospital and Lincoln, Maine-based Penobscot Valley Hospital —  have filed lawsuits to get the relief loans. A Texas-based ambulance company, Hidalgo County EMS, also filed a lawsuit. 

In the suits, the rural hospitals and EMS provider are seeking nearly $10 million in Paycheck Protection Program loans, according to the report. 

The Small Business Administration said last week 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," according to The Journal.

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