The Seventh Circuit Court of Appeals ruled on July 14, 2026, that the Small Business Administration (SBA) can enforce loan limits for nursing homes under the Paycheck Protection Program (PPP) established by the CARES Act. This decision affects Oak Lawn Respiratory and Rehabilitation Center and other nursing homes that sought loans exceeding the set limits. The ruling clarifies how federal relief funds can be distributed among businesses under common ownership.
The case, Oak Lawn Respiratory and Rehabilitation Center, LLC, et al. v. United States Small Business Administration, was filed under docket number 25-1346. The court's decision emphasizes the importance of adhering to the regulations set by the SBA during the COVID-19 pandemic, particularly regarding financial aid for small businesses.
Background
Oak Lawn Respiratory and Rehabilitation Center is one of 203 nursing homes that are under common control. These nursing homes applied for loans through the PPP, which was part of the CARES Act designed to provide financial relief during the pandemic. The CARES Act allowed the SBA to guarantee loans and even forgive them under certain conditions, turning loans into grants for eligible businesses.
However, as demand for these loans exceeded the available funds, the SBA implemented a rule known as the Corporate Group Rule. This rule capped the total amount of loans a corporate group could receive at $20 million. By the time Oak Lawn applied for its loan, the other nursing homes under common control had already received more than this cap. The bank processed Oak Lawn's loan application without knowledge of this limit, leading to a significant financial dispute when the SBA later limited loan forgiveness.
The Ruling
The Seventh Circuit Court, led by Judge Frank Easterbrook, upheld the SBA's Corporate Group Rule. 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." This ruling confirms that the SBA has the authority to limit loan guarantees based on corporate groupings.
The court also noted that the SBA's discretion in managing loan guarantees is supported by the CARES Act, which allows the agency to set regulations to ensure fair distribution of funds. The judges emphasized that the SBA's decision to limit loans to corporate groups was a reasonable response to the overwhelming demand for financial assistance during the pandemic.
Impact
This ruling has significant implications for nursing homes and other businesses that operate under common ownership. It reinforces the SBA's authority to regulate loan distribution and ensures that limited federal resources are allocated fairly among small businesses. The decision may deter similar businesses from attempting to circumvent the loan limits set by the SBA, as the court has affirmed the agency's regulatory powers.
Moreover, this case sets a precedent for how federal agencies can manage financial aid programs during emergencies. By upholding the Corporate Group Rule, the court has indicated that agencies can impose restrictions to ensure equitable access to funds, which could influence future legislation and regulatory practices.
What's Next
Details were not available in the court filing regarding whether Oak Lawn plans to appeal the decision. However, the ruling could potentially lead to further litigation from other nursing homes or businesses affected by similar loan limits under the CARES Act.