SBA Defends Call to Exclude Bankrupt Borrowers From Virus Aid

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 ...