The financial security of small U.S. auto lenders during the COVID-19 crisis may be owed, in part, to the advocacy of a Michigan strip club.

A U.S. district judge recently sided with the owner of the Flint, Mich., topless club Little Darlings, who went toe-to-toe with the federal government about his business’s eligibility to participate in the federal Paycheck Protection Program. The decision could open the gate for auto lenders and other financial institutions excluded from the federal program following updated guidance from the U.S. Small Business Administration.

It is unclear how many auto lenders took funds through the SBA or how many returned them on or before the May 18 deadline. Under the most recent guidance, businesses won’t be penalized for returning the funds.

An April revision to the PPP loan criteria retroactively excluded a variety of businesses — including auto lenders — from participating in the stimulus. The change also targeted businesses that feature live performances or sell products of a “prurient sexual nature,” leading to a federal lawsuit from the Little Darlings owner.

The club’s owner filed the lawsuit April 8 against the SBA, its administrator Jovita Carranza and Treasury Secretary Steven Mnuchin, the Detroit News first reported, alleging the guidance discriminated against strip club workers.

U.S. District Judge Matthew Leitman issued a preliminary injunction May 11 barring the SBA from excluding private clubs.

The American Financial Services Association wrote in a blog post that the ruling may offer clarity for lenders about whether returning the funds is required.

“While that is obviously not the business that AFSA members are engaged in, the judge also said the SBA cannot exclude other businesses, i.e. banks, because Congress intended to support all qualified small businesses, including those it might have ‘disfavored’ before the pandemic,” the post said.

The SBA has issued numerous updates on how the PPP loans should be implemented. AutoNation Inc., the nation’s largest dealership group, returned $77 million in loans just before an April 26 revision that clarified large public companies could not demonstrate a need for the stimulus funds.

George Fussell, CEO of subprime lender SAFCO, said he estimates as many as 100 auto lenders may have received PPP loans. His company received a loan of “a few million dollars” to pay its 130 full-time employees, he said. The lender serves 2,500 independent and franchised dealerships and has 17,000 active customers, Fussell said.

Lenders that have taken the money most likely have already spent it or allocated the funds to maintaining a full work force, he said.

“This is just one resource that was used, and we don’t know when this is going to go away,” Fussell said. “The capital markets are fairly frozen for this type of borrower.”

AFSA said it also had been awaiting a verdict in another lawsuit — since dropped — brought by Payday Loan LLC in U.S. District Court in California. The company, a lending and check-cashing institution with 22 locations in the state, sued the SBA on April 25 when its request for a $644,000 forgivable loan was denied. The company dropped its suit May 11.

AFSA President Bill Himpler said in an email to Automotive News that independent auto finance lenders play a key role in the economy.

“This PPP issue has been a challenge from Day One and AFSA has been working since then to educate policy makers about the important ripple effect businesses, such as independent auto finance lenders and dealers, play,” Himpler said.