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SBA Defends Call to Exclude Bankrupt Borrowers From Virus Aid

May 7, 2020, 6:34 PM

The Small Business Administration is within its authority to exclude bankrupt companies from borrowing under the Paycheck Protection Program, the agency told a Texas bankruptcy court.

The emergency PPP loans, created by the CARES Act, aren’t a governmental “grant” subject to bankruptcy code section 525(a), the SBA said in a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

The section prohibits governmental units from discriminating against companies for having filed a bankruptcy case.

Whether a PPP loan can be considered a grant is an issue bankruptcy courts across the country are wrestling with as more...

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