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

Loan Terms and Revision of Loan Terms

• 14 (1) Repayment of a loan is required to be made in instalments that are payable at least annually but, at the option of the lender, repayments may be scheduled more frequently than annually.

• (1.1) Where a loan is advanced in more than one disbursement, repayment of the first principal instalment shall be scheduled not later than one year from the date of the initial disbursement under the loan.

• (2) Subject to paragraph 3(2)(e) of the Act, the terms for repayment of a loan shall be set out in the agreement in connection with the loan and the repayment period and the amount and frequency of instalment payments shall conform to the ability of the borrower to pay, having regard to the kind of business enterprise carried on, the relevant business practices and conditions, the repayment of other obligations and to any other relevant circumstances.

• (3) Where a borrower is in default in respect of the repayment of a loan or advises the lender that some of the terms of the agreement in connection with the loan are such that he may have to default, or where a borrower wishes to take out additional loans, and the lender is of the opinion that it would be appropriate in the light of the borrower’s total repayment obligations to alter or revise the terms of the loan or any agreement in connection therewith, the lender may, with the approval of the borrower, alter or revise the terms of the loan or agreement by

  • (a) extending the term for repayment of the loan within the maximum terms specified in the Act;

  • (b) changing the amount of the periodic instalments; or

  • (c) changing the periods between instalments, but in no case shall instalments be due less frequently than annually.

• (4) Where, in the circumstances described in subsection (3), the borrower and the lender agree to alter or revise the repayment terms of a loan and that agreement would result in longer terms for repayment than those authorized under paragraph 3(2)(e) of the Act, it is a condition of the Minister’s liability with respect to the loan that the alteration or revision has been given the prior written approval of the Minister.

• (5) [Repealed, SOR/92-220, s. 6]

• (6) [Repealed, SOR/87-591, s. 8]

Rate of Interest

15 The maximum rate of interest per annum payable, as set out in the written promise to repay, to a lender in respect of a loan shall be the aggregate of one per cent per annum and

• (a) in the case of a lender incorporated by or under the provisions of the Bank Act or established pursuant to the Treasury Branches Act of Alberta, the prime lending rate, as fixed daily during the term of the loan, of that lender;

• (b) in the case of a lender that is a credit union, caisse populaire or other cooperative credit society and that is designated by the Minister as a lender for the purposes of the Act, the prime lending rate, as fixed daily during the term of the loan, of any one of the following institutions that is selected by the lender when the loan is made, namely,

  • (i) any one of the lenders chartered under the Bank Act,

  • (ii) the Canadian Co-operative Credit Society,

  • (iii) la Caisse centrale Desjardins du Québec, or

  • (iv) the lender’s provincial central, federation, league or society, as the case may be; or

• (c) in the case of a lender that is a trust, loan or insurance corporation that is designated by the Minister as a lender for the purposes of the Act, the prime lending rate, as fixed daily during the term of the loan, of any one of the lenders chartered under the Bank Act that is selected by the lender when the loan is made.

When Entire Amount Becomes Due and Payable

• 16 (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.

Misrepresentation

17 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.

Procedure on Default

• 18 (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.

Procedure for Claims

• 19 (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]

• 20 (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.