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Small Businesses Loans Regulations (C.R.C., c. 1501)

Regulations are current to 2024-05-28

When Entire Amount Becomes Due and Payable

  •  (1) Where a borrower is in default in respect of any payment on a loan, the entire amount of the balance outstanding on the loan shall, at the option of the lender, become due and payable.

  • (2) Where a borrower is convicted of an offence under the Act, the entire amount of the balance outstanding on a loan shall become due and payable.

  • SOR/92-220, s. 13

Misrepresentation

 Where a lender discovers that any statement in an application for a loan is false in any material respect or that a borrower has used or is using the proceeds of a loan otherwise than for a purpose specified in the application for a loan, the lender may take any action it considers proper in the circumstances and shall immediately make a full report in respect of the matter to the Minister who may request the lender to take such action or further action as he may require.

  • SOR/92-220, s. 13

Procedure on Default

  •  (1) Where a borrower is in default in respect of any payment on a loan and the entire amount of the balance outstanding on the loan becomes due and payable pursuant to section 16, the lender may take such action, whether by legal proceedings or otherwise, as it considers advisable in the circumstances to

    • (a) effect collection of the loan;

    • (b) obtain additional security;

    • (c) realize upon any or all the security it has taken; or

    • (d) effect any compromise with or grant any concession to any person other than the borrower.

  • (2) Any action taken by the lender pursuant to subsection (1) shall not discharge the liability of the Minister to the lender under the Act.

  • SOR/92-220, s. 13

Procedure for Claims

  •  (1) A claim for loss by a lender in respect of a loan shall not be made to the Minister until 90 days have elapsed after the entire amount of the loan becomes due and payable.

  • (1.1) The lender shall submit any claim for loss to the Minister within 19 months after the date on which the default in repayment of the loan occurred.

  • (1.2) The Minister may, where the lender makes a request in accordance with the form set out in Schedule III, extend one or more times the period of 19 months referred to in subsection (1.1).

  • (1.3) A request for an extension of the period of 19 months referred to in subsection (1.1) shall be made before the expiration of that period or of that period as extended by the Minister, as the case may be.

  • (2) The loss sustained by a lender in respect of a loan shall be determined by aggregating the following, namely,

    • (a) the unpaid principal amount of the loan;

    • (b) interest earned on the loan over any period and outstanding at the time the claim is approved for payment by the Minister, calculated

      • (i) where the interest was earned over a period of 180 days or less, at the rate of interest referred to in subsection (2.1), or

      • (ii) where the interest was earned over a period of more than 180 days,

        • (A) at the rate of interest referred to in subparagraph (i) for the first 180 days of the period or, where in the opinion of the Minister reasons beyond the control of the lender justify calculating the interest at that rate for more than 180 days, at that rate for such greater number of days as are approved by the Minister, and

        • (B) for the remainder, if any, of the period over which the interest was earned, at a rate of interest equal to one-half of the rate of interest referred to in subparagraph (i).

    • (c) any uncollected taxed costs for or incidental to legal proceedings in respect of the loan;

    • (d) legal fees, legal costs and legal disbursements, whether taxable or not, actually incurred by the lender, with or without litigation, in collecting or endeavouring to collect the loan or in protecting the interests of the Minister but only to the extent that the Minister allows; and

    • (e) any other disbursements actually incurred by the lender in collecting or endeavouring to collect the loan or in protecting the interests of the Minister but only to the extent that the Minister allows.

  • (2.1) For the purpose of paragraph (2)(b), the rate of interest shall be fixed at a rate not exceeding the aggregate of one per cent per annum and the average of the prime lending rates in effect at the following lenders on the last day of the month preceding the month in which the interest referred to in paragraph (2)(b) commenced to be earned:

    • (a) the Bank of Montreal;

    • (b) the Canadian Imperial Bank of Commerce;

    • (c) the National Bank of Canada;

    • (d) The Bank of Nova Scotia;

    • (e) The Royal Bank of Canada; and

    • (f) The Toronto-Dominion Bank.

  • (2.2) Subject to subsection (2.3), where, in the case of any loan by a lender, the evidence submitted by the lender pursuant to paragraph (3)(c) shows that

    • (a) the actual cost of the fixed equipment, movable equipment, premises or land, as the case may be, in respect of which the loan was made was less than the estimated cost shown in the application for the loan, and the loan was made in an amount exceeding

      • (i) 80 per cent of the actual cost of the fixed equipment,

      • (ii) 80 per cent of the actual cost of the movable equipment,

      • (iii) 90 per cent of the actual cost of the premises, or

      • (iv) 90 per cent of the actual cost of the land,

      as the case may be or

    • (b) only a portion of the funds advanced by the lender in respect of the loan were expended for the purpose set out in the application for the loan,

    the loss sustained by the lender in respect of the loan shall, notwithstanding subsection (2), be determined as that proportion of the amount determined pursuant to subsection (2) that

    • (c) where paragraph (a) applies, the actual cost referred to in that paragraph is of the estimated cost referred to in that paragraph; and

    • (d) where paragraph (b) applies, the portion expended for the purpose set out in the application for the loan is of the funds advanced by the lender in respect of the loan.

  • (2.3) Where both paragraphs (2.2)(a) and (b) apply, the loss sustained by the lender is the lesser of the amounts obtained pursuant to paragraphs (2.2)(c) and (d).

  • (3) Every claim for loss shall be certified by a responsible officer of the lender and shall be accompanied by:

    • (a) evidence that the loan has been registered by the Minister;

    • (b) a copy of the borrower’s signed application form certified by a responsible officer of the lender;

    • (c) documentation substantiating

      • (i) the actual cost of the fixed equipment, movable equipment, premises or land, as the case may be, in respect of which the loan was made, and

      • (ii) the amount of the funds advanced by the lender in respect of the loan that were expended for the purpose set out in the application for the loan; and

    • (d) any additional information or documents that the Minister requires to be provided.

  • (4) A claim for loss by a lender in respect of a loan shall be approved for payment by the Minister within 60 days after receipt by the Minister of the claim for loss and all evidence, information and documents required by subsection (3) to accompany the claim for loss.

  • (5) Where a claim for loss by a lender has been paid pursuant to subsection (4), the lender shall

    • (a) acknowledge receipt of payment to the Minister in writing; and

    • (b) deal with any security held by it for the loan in such manner as the Minister may direct.

  • (6) Any expense incurred by the lender in dealing with any security pursuant to paragraph (5)(b) shall be paid by the Minister to the lender.

  • (7) [Repealed, SOR/78-140, s. 8]

  • SOR/78-140, ss. 7, 8
  • SOR/79-151, ss. 3, 4
  • SOR/85-396, s. 6
  • SOR/87-591, s. 10
  • SOR/92-220, ss. 8, 13 and 14(F)
  •  (1) When acting on behalf of the Minister, a lender shall, notwithstanding that its claim for loss in respect of a loan has been paid, take such reasonable steps as the Minister considers necessary to

    • (a) collect payments of principal and interest due by the borrower under the terms of the loan;

    • (b) realize upon any security taken under these Regulations; and

    • (c) effect a compromise with or grant a concession to any person for the purpose of the collection or realization referred to in paragraph (a) or (b), as the case may be.

  • (2) Where any amount is collected or realized by a lender pursuant to subsection (1) with respect to a loan, the lender shall forthwith remit to the Minister

    • (a) if the loan was made prior to April 1, 1985, the whole of the amount collected or realized; and

    • (b) if the loan was made after March 31, 1985, that percentage of the amount collected or realized that is applicable by virtue of paragraph 3(1)(b) of the Act.

  • (3) Any actual expenses of the lender incurred under subsection (1) shall be paid by the Minister to the lender.

  • SOR/78-140, s. 9
  • SOR/85-396, s. 7
  • SOR/87-591, s. 11
  • SOR/92-220, s. 13

Reports to Minister

 Any lender that has made a loan under these Regulations shall furnish to the Minister such reports or information as the Minister may from time to time require.

  • SOR/92-220, s. 13

Subrogation

  •  (1) Where, under the Act and these Regulations, the Minister has paid to a lender all or any of the amount of loss sustained by the lender as a result of a loan, Her Majesty is thereupon subrogated in and to all the rights of the lender in respect of that loan and, without limiting the generality of the foregoing, all rights and powers of the lender in respect of

    • (a) the loan,

    • (b) any judgment obtained by the lender in respect of the loan, and

    • (c) any security taken by the lender for the repayment of the loan,

    are thereupon vested in Her Majesty and Her Majesty is entitled to exercise all the rights, powers and privileges that the lender had or might exercise in respect of the loan, judgment or security, including the right to commence or continue any action or proceeding, to execute any release, transfer, sale or assignment, or in any way to collect, realize or enforce the loan, judgment or security.

  • (1.1) The maximum rate of interest per annum payable to Her Majesty with respect to a subrogated debt to which the subrogated rights referred to in subsection (1) relate shall be calculated for each month before the first day of the month and shall be the average of the prime lending rates in effect at the following lenders on the last day of the month preceding the month for which the rate is calculated:

    • (a) the Bank of Montreal;

    • (b) the Canadian Imperial Bank of Commerce;

    • (c) the National Bank of Canada;

    • (d) The Bank of Nova Scotia;

    • (e) The Royal Bank of Canada; and

    • (f) The Toronto-Dominion Bank.

  • (2) Where the Minister has paid to a lender less than the full amount of the loss sustained by the lender in respect of a loan and Her Majesty, by means of the exercise of any right to which Her Majesty is subrogated, recovers an amount that is greater than the costs and expenses of recovery, but that, after deducting such costs and expenses, is less than the full amount of the loss, Her Majesty is entitled to that proportion of the net amount recovered that the portion of the loss borne by Her Majesty is of the full amount of the loss and the remainder of the net amount recovered shall be paid by the Minister to the lender.

  • SOR/85-396, s. 8
  • SOR/92-220, ss. 9, 13

Registry

 The registry established by the Minister pursuant to the Small Businesses Loans Regulations, made by Order in Council P.C. 1960-1764 of December 22, 1960, for the purpose of recording loans made under the Act is hereby continued.

Charge for Insurance

  •  (1) Where a lender, under the terms of a business improvement loan or any agreement in connection therewith, pays the premium under a policy of insurance under which any amount is or may become payable to the lender, the lender may charge the amount of the premium to the borrower.

  • (2) Notwithstanding subsection (1), where the insurance premium is expressed as a percentage of the loan outstanding, it may be combined with the rate of the interest if the resultant rate of interest, as set out in the written promise to repay the loan, does not exceed the maximum rate prescribed by section 15.

  • SOR/87-591, s. 12
  • SOR/92-220, ss. 10, 13

Loan Notification and Fee Payment

  •  (1) Within a period of three months after the making of a loan by a lender,

    • (a) the lender shall present to the Minister a loan registration request in the form set out in Schedule II and containing all the required information and, pursuant to paragraph 3(4)(b) of the Act, a fee of one per cent of the amount of the loan in the form of the lender’s own remittance payable to the Receiver General; and

    • (b) the Minister shall, on receipt of the lender’s completed loan registration request and fee, register the loan as a guaranteed business improvement loan in the registry established for the purpose of recording loans made under the Act.

  • (2) Where the Minister has been unable to register the loan in circumstances where through inadvertence the lender has not within the period referred to in subsection (1) presented the loan registration request or paid the fee, the Minister may, provided the borrower is not in default in respect of any payment on the loan, extend the period until not more than one year after the date on which the initial disbursement of funds under the loan occurred.

  • (3) Where a loan is advanced by instalments,

    • (a) for the purposes of subsection (1), the loan shall be deemed to have been made on the date on which the initial disbursement of funds under the loan occurred; and

    • (b) the fee payable pursuant to paragraph (1)(a) is one per cent of the full amount of the loan and is payable at the time the lender presents the loan registration request, even in cases where the loan is not yet fully disbursed.

  • (4) and (5) [Repealed, SOR/92-220, s. 11]

  • SOR/85-396, s. 10
  • SOR/87-591, s. 13
  • SOR/92-220, s. 11
  • SOR/95-80, s. 1(E)

Acquisition of Business Improvement Loans Made by Another Lender

[
  • SOR/92-220, s. 13
]
  •  (1) Other than as prescribed by this section, the Minister’s liability to a lender with respect to a business improvement loan made pursuant to the Act ceases if the loan is transferred to, assigned to or acquired by another lender or any other person.

  • (2) Where a lender has made business improvement loans under the Act and the lender subsequently sells all of the business improvement loans outstanding on its books to another lender that is the successor lender, or amalgamates with one or more other lenders to form a newly amalgamated lender, the Minister’s liability under the Act continues in favour of the successor lender or the newly amalgamated lender, as the case may be, on the basis that, as of the effective date of the purchase or amalgamation,

    • (a) the amount of all business improvement loans that were made by the selling lender and the successor lender or by the amalgamating lenders and that were registered by the Minister pursuant to section 25 shall be aggregated and deemed for the purpose of section 5 of the Act to have been made by the successor lender or the newly amalgamated lender, as the case may be; and

    • (b) the amount of all claims for loss previously paid by the Minister to the selling lender and the successor lender or to the amalgamating lenders, as the case may be, shall be aggregated and deemed to be a loss sustained by the successor lender or the newly amalgamated lender, as the case may be, for the purpose of section 5 of the Act.

  • (3) Subject to subsection (4), where a lender has made business improvement loans under the Act and the lender subsequently

    • (a) sells all of the business improvement loans outstanding on its books to a purchaser that is a credit union, caisse populaire or other cooperative credit society or a corporation that, while not as yet designated by the Minister as a lender for the purposes of the Act, is eligible to be designated as a lender pursuant to paragraph (b) or (c) of the definition lender in section 2 of the Act, or

    • (b) amalgamates with one or more credit unions, caisses populaires or other cooperative credit societies or corporations to form an amalgamated corporation that, while not as yet designated by the Minister as a lender for the purposes of the Act, is eligible to be designated as a lender pursuant to paragraph (b) or (c) of the definition lender in section 2 of the Act,

    the Minister’s liability under the Act continues in favour of the purchaser or amalgamated corporation, as the case may be, if as of the effective date of the purchase or amalgamation,

    • (c) the amount of all business improvement loans that were made by the selling lender or the amalgamating lender and that were registered by the Minister pursuant to section 25 are deemed to have been made by the purchaser or the amalgamated corporation, as the case may be, and

    • (d) the amount of all claims for loss previously paid by the Minister to the selling lender or the amalgamating lender, as the case may be, are deemed to be a loss sustained by the purchaser or amalgamated corporation, as the case may be, for the purpose of section 5 of the Act.

  • (4) In the case of a sale or amalgamation referred to in subsection (3), the Minister’s liability continues only if

    • (a) the purchaser or the amalgamated corporation, as the case may be, applies to the Minister, before the acquisition or amalgamation or within one year thereafter, for designation as a lender for the purposes of the Act and for continuity of the Minister’s liability under the Act with respect to those business improvement loans that had been made by the selling or amalgamating lender; and

    • (b) the Minister designates the purchaser or the amalgamated corporation as a lender for the purposes of the Act.

  • SOR/87-591, s. 14
  • SOR/92-220, s. 12
  • SOR/95-80, s. 2(E)
 

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