Small Business Administration Guaranteed Loan

Legal representatives of a bank requested a decision concerning a loan guaranteed by the Small Business Administration (SBA) a company. SBA denied liability under the guaranty because the bank had not paid the required guaranty fee prior to default by the borrower. In accordance with previous decisions and opinions, determination by SBA to terminate its guarantee on the loan made by the bank was correct since SBA has no authority under the Loan Guaranty Agreement to accept payment of guaranty fee after default by the borrower. Arguments by the bank that it constructively complied with provisions of the Loan Agreement or that SBA is estopped from enforcing those provisions are not legally or factually supportable.