The Seventh Circuit Court of Appeals ruled on July 14, 2026, in favor of the United States Small Business Administration (SBA) regarding a dispute over loan forgiveness for nursing homes. The case, Parkshore Estates Nursing and Rehab Center v. United States Small Business Administration (docket number 25-1347), affects 203 nursing homes that sought financial relief during the COVID-19 pandemic. The decision is significant as it clarifies the SBA's authority to impose limits on loan amounts for businesses under common ownership.
The dispute began when Oak Lawn Respiratory and Rehabilitation Center, along with other nursing homes, applied for loans under the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act was designed to provide financial assistance to businesses affected by the pandemic, allowing them to apply for loans that could be forgiven if certain conditions were met. However, the aggregate demand for these loans exceeded the available funds, prompting the SBA to implement a rule limiting the total amount of loans a corporate group could receive.
The nursing homes in question were all part of a larger corporate group controlled by a partnership. When they applied for loans, they collectively had already received more than the $20 million cap set for corporate groups under the SBA rule. As a result, when they sought forgiveness for their loans, the SBA limited the forgiveness to $20 million, leaving the nursing homes responsible for repaying the remainder. This led to the legal challenge against the SBA, arguing that the Corporate Group Rule was invalid.
The plaintiffs contended that each nursing home should be treated as a separate entity eligible for the full loan amount. However, the court found that the SBA's rule was valid and within its authority. Judge Frank Easterbrook, writing for the court, stated, "The Corporate Group Rule does not declare any LLC or corporation to be ineligible for a loan guarantee. The question at hand is how much of a loan the federal government will guarantee, not whether any given firm is eligible for benefits." The court affirmed the lower court's decision, which had granted summary judgment in favor of the SBA.
The ruling emphasized that the SBA had the discretion to impose limits on loan guarantees to ensure that the limited resources available could benefit as many businesses as possible. The court noted that the nursing homes had not shown that the SBA's rule led to unused funds being returned to the Treasury, reinforcing the agency's rationale for the Corporate Group Rule. Judge Easterbrook further explained that the rule was not arbitrary or capricious, as it aimed to distribute financial assistance fairly among applicants.
This ruling has significant implications for nursing homes and other businesses that are part of larger corporate groups. It sets a precedent that the SBA can enforce loan limits based on corporate affiliations, which may affect how businesses structure themselves to apply for federal assistance in the future. The decision also underscores the importance of understanding the regulatory framework surrounding federal loan programs, especially in times of crisis.
Looking ahead, the nursing homes may consider appealing the decision, but details on any potential appeal were not available in the court filing. The ruling clarifies the SBA's authority and may discourage similar challenges from other businesses facing limitations under the PPP. As the pandemic continues to impact various sectors, the implications of this case will likely resonate throughout the business community, particularly among those seeking federal assistance.