Canada Small Business Financing Regulations (SOR/99-141)

Regulations are current to 2017-10-13 and last amended on 2016-02-19. Previous Versions

 When the loan term is longer than the applicable maximum term specified in subsection 6(2), the Minister must pay the lender the amount of any loss calculated in accordance with subsection 38(7) if the default referred to in section 36 occurs

  • (a) in the case of a loan referred to in paragraph 5(1)(a), before the expiry of 15 years after the day on which the first payment of principal and interest is due; and

  • (b) in the case of a loan referred to in paragraph 5(1)(b) or (c), before the expiry of 10 years after the day on which the first payment of principal and interest is due.

  • SOR/2009-102, s. 18;
  • SOR/2016-18, s. 7.

Transfer of Loans Between Lenders

  •  (1) A lender may assign a loan to another lender at the request of the borrower if the Minister’s liability under subsection 6(2) of the Act in relation to the remaining loans of the transferor does not, as a result of the transfer, exceed the amount already paid by the Minister to the transferor.

  • (2) The transferee must notify the Minister of the transfer in the form referred to in subsection (3). The Minister must determine whether the requirements set out in subsection (1) have been met and must notify both lenders of the determination.

  • (3) A form must be signed by the borrower and by both lenders and must include the loan registration number and the borrower’s acknowledgement that it has requested the transfer.

  • (4) The Minister’s liability under the Act continues in respect of any loss sustained by the transferee in respect of the loan.

  • SOR/2014-7, s. 18.
  •  (1) A lender, on the request of the borrower, may make a loan for the purpose of repaying a loan made by another lender in an amount not greater than the outstanding amount of the loan of the other lender if

    • (a) the loan term is not longer than the applicable maximum term specified in subsection 6(2); and

    • (b) security of the same rank is maintained or taken by the lender on the assets that were used to secure the loan of the other lender.

  • (2) For the purposes of the Act and these Regulations, a loan that is made under subsection (1) is considered to be a loan of the same class as the loan of the other lender.

  • (3) For the purpose of paragraph (1)(a), the loan term is the period beginning on the day on which the first payment of principal and interest is due in respect of the loan of the other lender and ending on the day on which the last payment of principal and interest is due in respect of the new loan.

  • (4) A lender that makes a loan under subsection (1) must notify the Minister of the making of the loan in the form referred to in subsection 29(3). The Minister must determine whether the requirements set out in subsection 29(1) have been met and must notify both lenders of the determination.

  • (5) Subsections 29(3) and (4) apply, with any modifications that the circumstances require, in respect of a loan made under this section.

  • SOR/2009-102, s. 19;
  • SOR/2016-18, s. 8.

Amalgamation of Lenders and other Actions Relating to Lending

  •  (1) Before undertaking any of the following actions, the lender must notify the Minister in writing of their intention to undertake the action and of the day on which it is to take effect:

    • (a) a lender amalgamates with another lender;

    • (b) a lender acquires the lending business of another lender;

    • (c) a lender discontinues its commercial lending business and sells all of its outstanding loans to another lender; and

    • (d) a lender closes a branch and sells that branch’s outstanding loans to another lender.

  • (2) When an action set out in paragraph (1)(a) takes effect, the Minister’s liability under the Act in respect of losses sustained by the amalgamating lenders as a result of loans made by them continues in respect of losses sustained by the new lender as a result of those loans and

    • (a) the loans made by the amalgamating lenders are considered to have been made by the new lender;

    • (b) the amount already paid by the Minister in respect of those loans to the amalgamating lenders as a result of the Minister’s liability under subsection 6(2) of the Act is considered to have been paid to the new lender; and

    • (c) if, as a result of the amalgamation, the amount already paid by the Minister to the amalgamating lenders as a result of the Minister’s liability under subsection 6(2) of the Act is greater than the Minister’s liability with respect to the new lender, the Minister’s liability is considered to be equal to the amount already paid.

  • (3) When an action set out in any of paragraphs (1)(b) to (d) takes effect, the Minister’s liability under the Act continues in respect of losses sustained by the transferee lender as a result of those loans and

    • (a) the Minister’s liability under the Act in respect of losses sustained by the transferor as a result of loans made by them continues in respect of losses sustained by the transferee;

    • (b) the loans made by the transferor are considered to have been made by the transferee;

    • (c) the amount already paid by the Minister in respect of those loans to the transferor as a result of the Minister’s liability under subsection 6(2) of the Act is considered to have been paid to the transferee; and

    • (d) if, as a result of the transfer, the amount already paid by the Minister to the transferor and transferee as a result of the Minister’s liability under subsection 6(2) of the Act is greater than the Minister’s liability with respect to the transferee, the Minister’s liability is considered to be equal to the amount already paid.

  • SOR/2014-7, s. 19.

 [Repealed, SOR/2014-7, s. 20]

Transfer of Loans Between Borrowers

  •  (1) On the sale of all assets of a small business whose purchase or improvement is being financed by a loan, the borrower may be released by the lender from, and the purchaser may assume, liability in respect of the loan if

    • (a) the purchaser is approved by the lender as a borrower in accordance with the due diligence requirements referred to in section 8 and the outstanding loan amount is not greater than the applicable limit referred to in any of paragraphs 4(2)(b) to (d) of the Act;

    • (b) security of the same rank is maintained or taken by the lender on the assets that were used to secure the loan; and

    • (c) a guarantee or suretyship referred to in section 19 taken with respect to the loan is replaced with another guarantee or suretyship in accordance with that section of an equal or greater value.

  • (2) On a change of partners in a partnership, an outgoing partner may be released from, and a new partner may assume, liability in respect of a loan if

    • (a) the new partner is approved by the lender as a borrower in accordance with the due diligence requirements referred to in section 8 and the outstanding loan amount is not greater than the applicable limit referred to in any of paragraphs 4(2)(b) to (d) of the Act;

    • (b) security of the same rank is maintained or taken by the lender on the assets that were used to secure the loan; and

    • (c) a guarantee or suretyship referred to in section 19 given with respect to the loan is replaced with another guarantee or suretyship in accordance with that section for an equal or greater value.

  • (3) On leaving a partnership, an outgoing partner who is not being replaced with a new partner may be released from liability in respect of a loan if

    • (a) the remaining partners are approved by the lender as borrowers in accordance with the due diligence requirements referred to in section 8 and the outstanding loan amount is not greater than the applicable limit referred to in any of paragraphs 4(2)(b) to (d) of the Act;

    • (b) security of the same rank is maintained or taken by the lender on the assets that were used to secure the loan; and

    • (c) a guarantee or suretyship referred to in section 19 given with respect to the loan is replaced with another guarantee or suretyship in accordance with that section for an equal or greater value.

  • SOR/2014-7, s. 21;
  • SOR/2016-18, s. 9.

Reporting Requirements

 A lender must provide the Minister, before every June 1, with a detailed report on all loans outstanding with that lender as at March 31 in the year of the report, including the following information with respect to each loan:

  • (a) the registration number;

  • (b) the borrower’s name;

  • (c) the amount of principal that is outstanding and not yet due and payable as at March 31 in that year; and

  • (d) the amounts, if any, of principal and interest that are due and payable as at March 31 in that year.

  • SOR/2009-102, s. 20.
 
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