Canada Small Business Financing Regulations

14 (1) A lender must, when making a loan referred to in any of paragraphs 5(1)(a) to (c), take valid and enforceable first-ranking security in the assets of the small business whose purchase or improvement is to be financed by the loan.

(2) If the purchase or improvement of the assets of the small business is to be financed by a loan and another source of financing, the security taken by the lender in those assets must be equal in rank to that taken in those assets in relation to the other source of financing.

(3) In the case of a loan referred to in paragraph 5(1)(b), or a loan referred to in paragraph 5(1)(c) for the financing of computer software, the lender may take security in any assets of the small business in respect of which the loan is made.

(4) If, within 30 days before or after the day on which a loan is made, the lender makes one or more conventional loans that are term loans to the same borrower to finance a purchase or improvement that would be eligible for a loan, the lender

• (a) must, in addition to any security otherwise required by this section to be taken, take security in the same assets and equal in rank to that taken to secure the conventional loan or loans; and

• (b) may take security to secure the conventional loan or loans on the same assets and equal in rank to that taken to secure the loan.

(5) If there is existing security in an asset whose purchase or improvement is to be financed by a loan, the security taken by the lender in that asset must be of the highest available rank, but if the existing security is the result of the application of a provision respecting subsequently acquired property, the lender must obtain all necessary postponements to ensure that the security in the asset is a first ranking charge.

(6) [Repealed, SOR/2016-18, s. 4]