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

Short Title

1 These Regulations may be cited as the Small Businesses Loans Regulations.

Interpretation

2 In these Regulations,

Act

Act means the Small Businesses Loans Act. (Loi)

averaging period

averaging period[Repealed, SOR/78-140, s. 1]

interest period

interest period[Repealed, SOR/78-140, s. 1]

3 For the purposes of the Act and these Regulations,

communications

communications means the business of radio and television broadcasting and the furnishing of community antenna services, telephone services and other electrical or electronic communication services; (communications)

construction

construction means the business of building and other construction and, without limiting the generality of the foregoing, includes general contracting, subcontracting, special trade contracting and the making of alterations and repairs; (construction)

fishing

fishing means the business of fishing by catching, gathering, trapping or harvesting fish inclusive of finfish, shellfish, crustaceans and all forms of aquatic life whether animal or vegetable and, without limiting the generality of the foregoing, includes all the establishments specified in section 031 — Fishing Industries — of the 1980 edition of the Standard Industrial Classification published by Statistics Canada; (la pêche)

manufacturing

manufacturing means the business of manufacturing or producing by hand, art, process or mechanical means any goods, wares or merchandise and, without limiting the generality of the foregoing, includes the business of repairing any goods, wares or merchandise; (fabrication)

responsible officer of the lender

responsible officer of the lender means

• (a) the manager or assistant manager of the lender or a branch thereof,

• (b) the person for the time being acting as the manager or assistant manager of the lender or a branch thereof,

• (c) the credit committee of the lender or a branch thereof, or

• (d) any person duly authorized by the lender to supervise the granting of loans; (fonctionnaire responsable du prêteur)

retail trade

retail trade means the business of purchasing any goods, wares or merchandise for resale to the public for personal or household use or consumption; (commerce de détail)

service business

service business means the business of providing services of any nature or kind to other business enterprises or to the public including insurance and real estate agencies; (entreprises de services)

transportation

transportation means the business of transporting persons or things; (transports)

wholesale trade

wholesale trade means the business of purchasing any goods, wares or merchandise for resale otherwise than to the public for personal or household use or consumption. (commerce de gros)

Application

4 These Regulations apply to a guaranteed business improvement loan authorized under the Act and made before April 1, 1993.

4.1 The definition equipment in section 2 of the Act includes

• (a) computer software;

• (b) any ship, boat or other vessel used or designed to be used in navigation;

• (c) piers, skidways, stages and wharves; and

• (d) any type of water supply system.

Classes of Businesses

5 These Regulations do not apply to any business or enterprise that is

• (a) not included in the definition business enterprise contained in section 2 of the Act;

• (b) eligible to apply for and receive a guaranteed farm improvement loan under the Farm Improvement Loans Act or a guaranteed loan under the Fisheries Improvement Loans Act;

• (c) primarily engaged in the mining of metals, minerals and non-metallic materials or in the production of petroleum or natural gas from wells or other deposits; or

• (d) primarily engaged in the financial, insurance or real estate business other than those defined as a service business.

Fiscal Period Determined

6 Where the fiscal period of a business enterprise is less than 365 days, the fiscal period thereof shall, for the purposes of the Act and these Regulations, be deemed to commence on the first day of the fiscal period of that business enterprise and end not less than 52 weeks after its commencement.

Application for Loan

7 Every applicant for a loan shall submit to the lender a signed application, in the form set out in Schedule I, containing the required information.

Classes of Guaranteed Business Improvement Loans

8 The following are the classes of loans prescribed for the purposes of the Act and these Regulations:

• (a) fixed equipment loans being loans made for the purpose of financing the purchase, installation, renovation, improvement or modernization of equipment of a kind usually affixed to real or immovable property;

• (b) movable equipment loans, being loans made for the purpose of financing the purchase, renovation, improvement or modernization of equipment of a kind not usually affixed to real or immovable property;

• (c) premises loans, being loans made for the purpose of financing

  • (i) the renovation, improvement, modernization or extension of premises, or

  • (ii) the construction or purchase of premises; and

• (d) land loans, being loans made for the purpose of financing the purchase of land necessary for the operation of a business enterprise.

Fixed Equipment Loans

9 Subject to the Act and these Regulations, a fixed equipment loan is a guaranteed business improvement loan if

• (a) the loan is made to a proprietor who is the owner or the tenant of the premises or land to which the equipment described in the application is affixed or on which the equipment is to be placed;

• (b) the loan is made in an amount not exceeding the greater of

  • (i) 80 per cent of the estimated cost of the purchase, installation, renovation, improvement or modernization of the equipment, excluding the cost of any labour of the borrower, as set out in the application for the loan, and

  • (ii) 80 per cent of the actual cost of the purchase, installation, renovation, improvement or modernization of the equipment, excluding the cost of any labour of the borrower, as evidenced by substantiating documentation; and

• (c) the lender has required, in accordance with normal banking requirements, and the borrower has provided evidence that the funds advanced in respect of the loan were expended for the purpose set out in the application for the loan.

Movable Equipment Loans

10 Subject to the Act and these Regulations, a movable equipment loan is a guaranteed business improvement loan if

• (a) the loan is made in an amount not exceeding the greater of

  • (i) 80 per cent of the estimated cost of the purchase, renovation, improvement or modernization of the equipment, as set out in the application for the loan, and

  • (ii) 80 per cent of the actual cost of the purchase, renovation, improvement or modernization of the equipment, as evidenced by substantiating documentation; and

• (b) the lender has required, in accordance with normal banking requirements, and the borrower has provided evidence that the funds advanced in respect of the loan were expended for the purpose set out in the application for the loan.

Premises Loans

11 Subject to the Act and these Regulations, a premises loan is a guaranteed business improvement loan if

• (a) the loan is made to a proprietor who

  • (i) in the case of a loan made for the purpose of financing the renovation, improvement, modernization or extension of premises, is the owner or tenant of the premises in respect of which the proceeds of the loan are to be expended, or

  • (ii) in the case of a loan made for the purpose of financing the construction or purchase of premises, is an owner or a person who will become an owner through purchase or construction of the premises in respect of which the proceeds of the loan are to be expended;

• (b) the loan is made in an amount not exceeding the greater of

  • (i) 90 per cent of the estimated cost of the renovation, improvement, modernization, extension, construction or purchase of any building or other structure, excluding the cost of any labour of the borrower, as set out in the application for the loan, and

  • (ii) 90 per cent of the actual cost of the renovation, improvement, modernization, extension, construction or purchase of any building or other structure, excluding the cost of any labour of the borrower, as evidenced by substantiating documentation; and

• (c) the lender has required, in accordance with normal banking requirements, and the borrower has provided evidence that the funds advanced in respect of the loan were expended for the purpose set out in the application for the loan.

Land Loans

12 Subject to the Act and these Regulations, a land loan is a guaranteed business improvement loan if

• (a) the loan is made in an amount not exceeding the greater of

  • (i) 90 per cent of the estimated cost of the purchase of the land, including any building or other structure on the land, as set out in the application for the loan, and

  • (ii) 90 per cent of the actual cost of the purchase of the land, including any building or other structure on the land, as evidenced by substantiating documentation; and

• (b) the lender has required, in accordance with normal banking requirements, and the borrower has provided evidence that the funds advanced in respect of the loan were expended for the purpose set out in the application for the loan.

Security

• 13 (1) A lender shall, at the time of making a loan of any prescribed class, acquire and perfect security for the repayment thereof by way of a security interest, in a form consistent with normal banking practice, in the fixed equipment, movable equipment, premises or land, as the case may be, in respect of which the funds advanced are to be expended.

• (1.1) Where a premises loan is made to a proprietor who is a tenant of the premises, a lender may, in lieu of the security referred to in subsection (1), acquire and perfect alternate security.

• (1.2) Subsections (1) or (1.1), as the case may be, apply in respect of a loan even if normal banking practices would not require a lender to take any security for the loan.

• (2) A lender may release any security acquired in respect of a loan pursuant to subsections (1) or (1.1), as the case may be, but shall, throughout the term of the loan remaining after such release, maintain adequate security in accordance with normal banking practice for the repayment of the balance of the loan outstanding at any time.

• (3) A lender may acquire security for the repayment of a loan in addition to the security referred to in subsection (1), (1.1) or (2).

• (4) Every lender shall, at the time of making a loan, require the borrower to give to the lender, in addition to any security referred to in subsection (1) or (1.1), a written promise to repay the loan signed by the borrower and setting out the principal amount of the loan, the basis for establishing the rate of interest which shall not exceed the applicable maximum rate prescribed by section 15, and the repayment terms not inconsistent with those set out in paragraph 3(2)(e) of the Act and in subsection 14(1).

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.