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Calais Regional Hospital is having trouble finding a bank that will lend it $1.8 million through a federal program that’s meant to help small businesses keep their doors open during the coronavirus pandemic. The hospital is having trouble even though a judge recently issued a temporary order allowing it to participate in the loan program.
The Calais hospital was initially denied participation in the Paycheck Protection Program because it has filed for Chapter 11 bankruptcy protection and the program’s interim rules bar bankrupt applicants from participating.
But while a judge has now granted a temporary restraining order allowing Calais Regional Hospital to apply for PPP funding after it filed a lawsuit against the head of the U.S. Small Business Administration, the hospital needs more time to pursue that funding because it has not yet secured the necessary support of a bank.
On Monday, Calais Regional Hospital asked Judge Michael Fagone for a 14-day extension on the deadline for its paperwork for the funds after it approached “multiple banks but has not yet found one that is willing to submit an application to [the Small Business Administration] on its behalf,” according to a court filing.
At least one of those banks “is concerned due to the fact that the eventual outcome of this adversary proceeding is not yet clear,” the hospital’s attorney, Andrew Helman of Portland, said in the filing.
“While our circumstance is not as clear cut as most applying for assistance through the PPP, we are optimistic we will find a banking partner to assist us with the application to the SBA,” Calais Regional Hospital spokesperson DeeDee Travis said in an email.
Another Maine hospital that’s in Chapter 11 bankruptcy, Penobscot Valley Hospital of Lincoln, has sued the Small Business Administration on the same grounds as Calais Regional Hospital. But the Lincoln hospital has secured the backing of Machias Savings Bank to apply for its own PPP loan, according to court records.
Both hospitals warned in their lawsuits against the Small Business Administration that they could close by June without the Paycheck Protection Program funds.
To participate in the loan program, businesses must find a qualified bank to apply on their behalf. If the application is approved, the bank can then extend a loan that’s guaranteed by the federal government and that can be forgiven by the Small Business Administration if at least 75 percent of it is spent on payroll.
Calais Regional Hospital originally filed an application with First National Bank for $1.8 million through the federal loan program in early April, but the bank placed the application on hold because of the interim rules barring it from submitting an application for any entity that’s in bankruptcy, according to the hospital’s court filings.
In their lawsuits, Calais Regional Hospital and Penobscot Valley Hospital have both said that they are facing steep revenue shortfalls after following state and federal guidance to cancel profitable elective services over the last two months to help control the spread of the coronavirus. They also argued that they should be allowed to participate in the PPP because the law that created the program does not include restrictions against bankrupt entities.
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