Small Business Administration Purchase of Loans When Guaranty Fee Is Not Paid Prior to Default

Reconsideration was requested of a decision which stated that, under the Blanket Guaranty Agreement between the Small Business Administration (SBA) and lending institutions participating in SBA's guaranteed loan program, SBA could not purchase a guaranteed loan if the required guaranty fee had not been paid by the bank before the loan went into default or before the bank had reason to believe that a default was imminent. The decision was affirmed. The disputed provisions in the agreement create a condition precedent binding on the lending institutions and SBA. The requirement that the fee be paid within five days is not necessarily a material one, but the requirement for payment of a fee prior to the borrower's default is crucial to the Government's interests, and SBA may not purchase the guaranteed loan if the fee has not been paid prior to default. No agent of the Government has the authority to waive the Government's contractual right without compensating benefit. SBA is not estopped from enforcing the guaranty fee provision since the 4-step test for estopping the Government was not satisfied.