The Relative Priority of Small Business Administration Liens: An Unreasonable Extension of Federal Preference?
During the past three decades, the priority of the federal government as against state and private creditors competing for the assets of debtors has been greatly strengthened. In terms of relative growth, the expansion of federal priority has been comparable to the increased commercial involvement of the United States. In more recent years, Congress and the judiciary have recognized that this increased governmental commercial activity necessitates a restriction in sovereign prerogatives. However, contrary to this general trend toward the contraction of sovereign prerogatives and for reasons appearing unsatisfactory to most commentators, the “sovereign prerogative” of priority to the assets of a debtor has been expanded rather than limited. One agency in particular, the Small Business Administration, has increasingly utilized this prerogative in order to collect its loans when faced with the claims of competing creditors. It is the thesis of this comment that the priority which has been judicially accorded the SBA is now extended beyond reasonable bounds and should be severely restricted.