[SBA Authority To Pay Interest on Funds Advanced by Bank at SBA Request]

A certifying officer of the Small Business Administration (SBA) requested a legal opinion as to whether SBA has authority to pay interest charges on monies it requested a private bank to advance so that SBA could purchase property at a foreclosure sale. After a default by the borrower on his SBA-guaranteed loan, SBA purchased 90 percent of the guaranteed loan from the private lender bank as SBA was legally obligated to do, assumed the loan servicing responsibilities, placed the loan in liquidation, and proceeded to dispose of personal property collateral from the borrower. GAO held that the authority granted the Administrator of SBA to take actions deemed necessary in dealing with loans made under the Small Business Act is sufficiently broad to encompass SBA actions in this case. GAO noted that SBA sought to protect its security interest in the loan collateral that otherwise would have been lost. Accordingly, SBA may pay the private bank's claim for accrued interest. Finally, GAO expressed concern about the informal, oral nature of SBA commitment to the bank.