Canada Small Business Financing Regulations

9 (1) The borrower must, before the loan is approved, provide to the lender from, subject to subsection (2), an appraiser who is a member of any professional association that is recognized under a federal or provincial law and who is at arm’s length from the borrower, and, in the case of assets described in paragraph (c), from the lender, an appraisal, made at any time within 180 days before the loan is approved, of the value of the assets if a borrower uses, or intends to use, all or part of a loan to purchase

• (a) assets from a person who is not at arm’s length from the borrower;

• (b) all or substantially all of the assets of a going concern; or

• (c) assets from the lender or its representative that, at the time of purchase, are being or had been used to secure a conventional loan of the lender.

(2) In the case of a loan to purchase equipment or leasehold improvements, if there is no professional association referred to in subsection (1) whose members are qualified to conduct such an appraisal, the appraisal must be made by an appraiser who is at arm’s length from the borrower and, in the case of equipment or leasehold improvements that are assets referred to in paragraph (1)(c), the lender.

(3) The borrower must, before the loan is approved, provide to the lender from an appraiser who is a member of any professional association referred to in subsection (1) and who is at arm’s length from the borrower, an appraisal, made at any time within 180 days before the loan is approved, of the estimated value of the improved asset if

• (a) the borrower uses, or intends to use, all or part of the loan to improve an asset;

• (b) the estimated cost of the services required to improve the asset represents all or substantially all of the estimated value of the improved asset; and

• (c) the services are to be provided by a person who is not at arm’s length from the borrower.

(4) If an appraisal is required, the amount of the loan must be based on the lesser of

• (a) the cost of purchasing or improving the asset or both, and

• (b) the appraised value of the asset or improved asset.