Small Business Loans Act

Act

Table of contents

1. Short title
2. Interpretation
3. Business Improvement Loans
4. Termination of operation of section 3
5. Limitation of liability in respect of loans made during loan periods
6. Further limitation of liability
7. Regulations
8. Regulations concerning certain terms
9. Offences and punishment
10. General

11. Annual report

Chapter S-11

An Act to increase the availability of loans for the purpose of the establishment, expansion, modernization and improvement of small business enterprises.

Short title

1.  This Act may be cited as the Small Business Loans Act.

R.S., 1985, c. S-11, s. 1; 1993, c. 6, s. 1(E).

Interpretation

2.  In this Act,

"borrower"
« emprunteur »

"borrower" means a person to whom a business improvement loan has been made;

"business enterprise"
« entreprise commerciale »

"business enterprise" means an enterprise carried on or about to be carried on in Canada for gain or profit, but does not include the business of farming or a business having as its principal object the furtherance of a charitable or religious purpose;

"business improvement loan"
« prêt »

"business improvement loan" means a loan made by a lender to a proprietor of a business enterprise for the purpose of financing the purchase of land necessary for the operation of the business enterprise or the purchase, installation, renovation, improvement or modernization of equipment or premises necessary for its operation, and includes a loan relating to the construction of premises and payment of the fee required under paragraph 3(4)(b);

"class of business improvement loans"
« catégorie de prêts »

"class of business improvement loans" means a prescribed class of business improvement loans;

"equipment"
« matériel »

"equipment" means equipment used or to be used in the course of carrying on the business enterprise in respect of which this definition is applied and

1. includes anything prescribed as included in this definition, and
2. does not include stock-in-trade or goods described in the inventory of the enterprise or anything prescribed as excluded

"gross revenue"
« produit d'exploitation »

"gross revenue", as applied to a fiscal period of a business enterprise, means the aggregate of all amounts received in the period or receivable in the period, depending on the method regularly followed in computing the profit from the enterprise, otherwise than as or on account of capital;

"guaranteed business improvement loan"
« prêt garanti »

"guaranteed business improvement loan" means a business improvement loan made in accordance with the requirements of
section 3;

"lender"
« prêteur »

"lender" means

1. a member of the Canadian Payments Association established under the Canadian Payments Association Act,
2. a local cooperative credit society, as defined in subsection 2(1) of the Canadian Payments Association Act, that is a member of a central cooperative credit society, as defined in that subsection, that is a member of the Canadian Payments Association, or
3. any other organization that is designated as a lender for the purposes of this Act by the Minister on the application of that organization;

"Minister"
« ministre »

"Minister" means such member of the Queen's Privy Council for Canada as is designated by the Governor in Council as the Minister for the purposes of this Act;

"premises"
« locaux »

"premises" means premises used or to be used in the course of carrying on the business enterprise in respect of which the expression is being applied, but does not include land;

"prescribed"
Version anglaise seulement

"prescribed" means prescribed by the regulations;

"proprietor"
« exploitant »

"proprietor", in relation to a business enterprise, means the person by whom the enterprise is carried on or is about to be carried on, whether as sole proprietor or in association or partnership with any other person having a proprietary interest therein, but does not include Her Majesty or an agent of Her Majesty in right of Canada or a province, a municipality or a municipal or other public body that performs a function of government;

"small business enterprise" [Repealed, 1993, c. 6, s. 2]
R.S., 1985, c. S-11, s. 2; R.S., 1985, c. 19 (1st Supp.), s. 1, c. 22 (3rd Supp.), s. 2; 1991, c. 47, s. 745; 1993, c. 6, s. 2.

Business Improvement Loans

Payment of lenders' losses

3.  (1) Subject to this Act and, in particular, to the conditions set out in subsection (2), the Minister is liable to pay to a lender

1. the amount of any loss sustained by the lender as a result of a business improvement loan made before April 1, 1985;
2. eighty-five per cent, or such other percentage as is provided by an appropriation Act or other Act of Parliament, of any loss sustained by the lender as a result of a business improvement loan made after March 31, 1985 and before April 1, 1993;
3. ninety per cent, or such other percentage as is provided by an appropriation Act or other Act of Parliament, of any loss sustained by the lender as a result of a business improvement loan made after March 31, 1993 and before the earlier of January 1, 1996 and the day that is sixty days after the day on which this paragraph comes into force; and
4. eighty-five per cent, or such other percentage as is provided by an appropriation Act or other Act of Parliament, of any loss sustained by the lender as a result of a business improvement loan made on or after the earlier day referred to in paragraph (c).

(1.1) [Repealed, 1995, c. 48, s. 1]

Conditions

(2) The conditions referred to in subsection (1) are as follows:

1. the borrower was the proprietor of the business enterprise in respect of which the loan was to be expended;
2. the estimated gross revenue of the business enterprise
   1. did not exceed five million dollars for the fiscal period of the business enterprise during which the loan was approved by the lender, or
   2. in the case of a business enterprise about to be carried on, was not expected at the time the loan was approved by the lender to exceed five million dollars for its first fiscal period that is of not less than fifty-two weeks duration;
3. the loan was made for the purpose of financing expenditures or commitments that did not arise more than one hundred and eighty days before the loan was approved by the lender;
4. the total of the following amounts did not at the time the loan was approved by the lender exceed two hundred and fifty thousand dollars, namely,
   1. the principal amount of the loan, and
   2. the aggregate balance outstanding of all guaranteed business improvement loans under this Act and guaranteed loans under the Fisheries Improvement Loans Act previously made to the borrower and either disclosed to the lender by the borrower or of which the lender had knowledge;

   (d.1) if the loan relates to premises,

   1. at least fifty per cent of the area of the premises was used in carrying on the business enterprise or, at the time the loan was approved by the lender, was intended to be so used within ninety days after the final advance under the loan, or
   2. at least fifty per cent of the gross revenues of the business enterprise were derived from business activity on the premises or, at the time the loan was approved by the lender, were expected to be so derived;
5. the loan was repayable in full by the terms thereof within the period prescribed for that loan, and in any event in not more than ten years after the date of the first scheduled principal instalment, as prescribed, under the loan;
6. no fee, service charge or charge of any kind was by the terms of the loan payable to the lender in respect of the loan as long as the borrower was not in default, other than
   1. a prescribed fee or charge,
   2. a charge not exceeding the amount of the fee payable by the lender pursuant to paragraph (4)(b), and
   3. interest at a rate not exceeding the prescribed maximum rate or the maximum rate determined by the prescribed formula or formulae;
7. the repayment of the loan was secured in the prescribed manner;
8. the loan was not made for a purpose deemed for the purposes of this Act to be contrary to the public interest; and
   1. the loan came within a prescribed class of business improvement loans and was made on such terms and in accordance with such conditions, in addition to those specified in paragraphs (a) to (h), as were prescribed for loans of that class.

Amalgamated borrowers

(3) For the purposes of paragraph (2)(d),

1. the expression "other guaranteed business improvement loans under this Act and guaranteed loans under the Fisheries Improvement Loans Act previously made to the borrower" includes, in the case where the borrower is a business enterprise formed by an amalgamation, all other guaranteed business improvement loans under this Act and all guaranteed loans under the Fisheries Improvement Loans Act previously made to any of the enterprises that amalgamated; and
2. that paragraph is not contravened by reason only that, at the time of an amalgamation, the aggregate balance outstanding of all guaranteed business improvement loans under this Act and guaranteed loans under the Fisheries Improvement Loans Act previously made to any of the enterprises that amalgamate exceeds two hundred and fifty thousand dollars.

Additional conditions

(4) The Minister is not liable under this Act to make any payment to a lender in respect of any loss sustained by the lender as a result of a business improvement loan unless

1. the lender has complied with the regulations made pursuant to this Act;
2. if the loan is made after March 31, 1985, the lender has, at the time the loan is submitted for registration or any other prescribed time, paid to the Minister the registration fee; and
3. if the loan is made on or after the day on which this paragraph comes into force, the lender
   1. has, at the prescribed time and in addition to the registration fee, paid to the Minister the annual administration fee, and
   2. has not charged the borrower for that administration fee, otherwise than through the imposition of interest in accordance with this Act.

Registration fee

(5) The registration fee referred to in subsection (4) is

1. one per cent of the amount of the loan, in the case of a loan made on or before March 31, 1993;
2. two per cent of the amount of the loan, in the case of a loan made after March 31, 1993; or
3. any other fee that is prescribed or calculated in the prescribed manner.

Refund of fee

(6) On application by a lender, made within one year after the initial disbursement of funds under a loan, the Minister may

1. where the lender advanced less than the amount of the loan registered, refund to the lender that portion of the fee paid pursuant to paragraph (4)(b) that is attributable to the unadvanced portion of the loan and subtract the amount of the unadvanced portion from the amount of the loan registered; or
2. where the lender determines that the loan is not in compliance with the requirements of this Act, refund to the lender the fee paid pursuant to paragraph (4)(b) and delete the entire amount of the loan registered.

Minister may make payment

(7) Where, at the time a lender makes a loan, the prescribed maximum rate of interest, the maximum rate determined by the prescribed formula or formulae or a condition set out in paragraph (2)(e), (f) or (g) or subparagraph (4)(c)(ii) is not complied with, the Minister may pay to the lender the amount of any loss that is eligible for payment under subsection (1) if

1. the Minister is of the opinion that the non-compliance was inadvertent and that the loss was not affected by the non-compliance; and
2. the lender has reimbursed the borrower for any resultant overcharges and otherwise remedied the non-compliance prior to any default in respect of a payment on the loan or prior to the expiration of two years after the initial disbursement of funds under the loan, whichever occurs first.

R.S., 1985, c. S-11, s. 3; R.S., 1985, c. 19 (1st Supp.), s. 2, c. 22 (3rd Supp.), s. 3; 1990, c. 10, s. 1; 1993, c. 6, s. 3; 1995, c. 48, s. 1.

Termination of operation of section 3

4.  (1) The Minister may, with the approval of the Governor in Council, by notice to a lender terminate the operation of section 3 in respect of any class of business improvement loans, such termination to be effective after a time set out in the notice, and the Minister is not liable under this Act to make any payment to the lender in respect of any loan of that class made by the lender after that time.

When notice to be given

(2) A notice given to a lender under subsection (1) is not effective unless the time of termination therein set out is at least twenty-four hours after receipt of the notice at the head office of the lender.

R.S., c. S-10, s. 4.

Limitation of liability in respect of loans made during loan periods

5.  (1) The Minister is not liable under this Act to pay to a lender, in respect of losses sustained by it as a result of business improvement loans made by it during each of the periods referred to in paragraphs 6(1)(a) to (c), a total amount in excess of

1. ninety per cent of that part of the aggregate principal amount of the guaranteed business improvement loans made by it during that period that does not exceed one hundred and twenty-five thousand dollars;
2. fifty per cent of that part of the aggregate principal amount of the guaranteed business improvement loans made by it during that period that exceeds one hundred and twenty-five thousand dollars but does not exceed two hundred and fifty thousand dollars; and
3. ten per cent of that part of the aggregate principal amount of the guaranteed business improvement loans made by it during that period that exceeds two hundred and fifty thousand dollars.

Limitation of liability in respect of loans made during loan periods

(2) The Minister is not liable under this Act to pay to a lender, in respect of losses sustained by it as a result of business improvement loans made by it during the period referred to in paragraph 6(1)(d), a total amount in excess of

1. ninety per cent of that part of the aggregate principal amount of the guaranteed business improvement loans made by it during that period that does not exceed two hundred and fifty thousand dollars;
2. fifty per cent of that part of the aggregate principal amount of the guaranteed business improvement loans made by it during that period that exceeds two hundred and fifty thousand dollars but does not exceed five hundred thousand dollars; and
3. ten per cent of that part of the aggregate principal amount of the guaranteed business improvement loans made by it during that period that exceeds five hundred thousand dollars.

R.S., 1985, c. S-11, s. 5; R.S., 1985, c. 19 (1st Supp.), s. 3; 1995, c. 48, s.2.

Further limitation of liability

6.  (1) The Minister is not liable under this Act to make any payment to a lender in respect of any loss sustained by it as a result of a business improvement loan

1. made during the period commencing on April 1, 1983 and ending on March 31, 1985, after the aggregate principal amount of the guaranteed business improvement loans made by all lenders during that period exceeds one billion eight hundred million dollars;
2. made during the period commencing on April 1, 1985 and ending on March 31, 1990, after the aggregate principal amount of the loans submitted by all lenders to the Minister for registration as guaranteed business improvement loans made during that period exceeds four billion dollars or such other amount as is provided by an appropriation Act or other Act of Parliament;
3. made during the period commencing on April 1, 1990 and ending on March 31, 1993, after the aggregate principal amount of the loans submitted by all lenders to the Minister and registered as guaranteed business improvement loans made during that period exceeds two billion dollars or such other amount as is provided by an appropriation Act or other Act of Parliament; or
4. made during the period commencing on April 1, 1993 and ending on March 31, 1999, after the aggregate principal amount of the loans submitted by all lenders to the Minister and registered as guaranteed business improvement loans made during that period exceeds fifteen billion dollars or such other amount as is provided by an appropriation Act or other Act of Parliament.

Idem
(2) The Minister is not liable under this Act to make any payment to a lender in respect of any loss sustained by it as a result of a business improvement loan made after March 31, 1999.

R.S., 1985, c. S-11, s. 6; R.S., 1985, c. 19 (1st Supp.), s. 4, c. 14 (2nd Supp.), s. 1; 1989, c. 21, Sch. (ISTC) vote 2; 1990, c. 10, s. 2; 1993, c. 6, s. 4; 1994, c. 48, Sch. A (IC) vote 2b.

Regulations

Regulations

7.  (1) The Governor in Council may, subject to subsection (2), on the recommendation of the Minister, make regulations

1. prescribing the forms of claims, reports or other documents required in connection with guaranteed business improvement loans or for the effective operation of this Act;
2. [Repealed, 1993, c. 6, s. 5]
3. determining for the purposes of this Act the fiscal period of a business enterprise in any case where the fiscal period thereof otherwise determined is less than three hundred and sixty-five days;
4. prescribing classes of guaranteed business improvement loans, having regard to the purposes for which such loans are to be made, or otherwise;
5. prescribing, in respect of any class of business improvement loans,
   1. the nature of the proprietary or other interest in a business enterprise, or in the equipment or premises used in connection therewith, to be held by a borrower of a loan within the class,
   2. the security to be taken by the lender for the repayment of loans within the class,
   3. the terms of repayment and other terms, including provisions in respect of insurance, on which loans within the class are to be made,
   4. the conditions of the liability of the Minister under this Act in respect of loans within the class, in addition to the conditions specified in subsection 3(2), and
   5. the maximum rate of interest payable by a borrower or the formula or formulae by which the maximum rate of interest shall be determined;
   (e.1) prescribing the terms and conditions on which a lender may release any security, including a personal guarantee, taken for the repayment of a business improvement loan;
6. providing
   1. that in the event of actual or impending default in the repayment of a guaranteed business improvement loan, notwithstanding anything in this Act, the lender may alter or revise by way of an extension of time or otherwise, with
      1. the approval of the borrower, and
      2. in the case of an extension of time beyond the period provided for in paragraph 3(2)(e), the approval in writing of the Minister,

      any specified term of the loan or of any agreement in connection therewith, and

   2. that such an alteration or revision does not discharge the liability of the Minister in respect thereof under this Act;
7. prescribing, in the event of default in the repayment of a guaranteed business improvement loan, the measures to be taken by the lender and the procedures to be followed for the collection of the amount of the loan outstanding and the disposal or realization of any security for the repayment thereof held by the lender;
8. prescribing the method of determination of the amount of any loss sustained by a lender as a result of a guaranteed business improvement loan;
9. prescribing the procedure to be followed by a lender in making a claim for any loss sustained by it as a result of a guaranteed business improvement loan;
10. prescribing the steps to be taken by a lender to effect collection on behalf of the Minister of any guaranteed business improvement loan in respect of which payment has been made by the Minister to the lender under this Act, and providing that in the event of failure by the lender to take such steps the amount of the payment may be recovered by the Minister;
11. respecting the subrogation of Her Majesty in the rights of a lender with respect to a guaranteed business improvement loan;

    (k.1) prescribing the maximum rate of interest payable on a subrogated debt in the case of subrogation referred to in paragraph (k) or the formula or formulae by which the maximum rate of interest shall be determined;

12. requiring reports to be made periodically to the Minister by a lender in respect of guaranteed business improvement loans made by it;
13. prescribing the purposes for which business improvement loans may be made that shall be deemed, for the purposes of this Act, to be contrary to the public interest;
14. requiring guaranteed business improvement loans to be registered and respecting the registration of such loans;
15. prescribing the procedure for the submission, processing and payment of claims under this Act;
16. prescribing, for the purposes of paragraph 3(4)(b), the registration fee, or the method of calculating the registration fee, and the time when the fee is payable;

    (p.01) prescribing, for the purposes of subparagraph 3(4)(c)(i), the annual administration fee, or the method of calculating the annual administration fee, and the time when the fee is payable;

    (p.1) providing for the acquisition, assumption, transfer or assignment of guaranteed business improvement loans, including the attachment of terms and conditions to the acquisition, assumption, transfer or assignment of such loans and the adjustment of the Minister's liability;

    (p.2) prescribing things that are included in or excluded from the definition "equipment" in section 2; and

17. generally, for carrying into effect the purposes and provisions of this Act.

Regulations concerning certain terms

(2) A regulation by the Governor in Council under subparagraph (1)(e)(v) shall be made on the recommendation of the Minister and the Minister of Finance

R.S., 1985, c. S-11, s. 7; R.S., 1985, c. 19 (1st Supp.), s. 5, c. 22 (3rd Supp.), s. 4; 1990, c. 10, s. 3; 1993, c. 6, s. 5, c.34, s. 112; 1995, c. 48, s. 3.

8.  [Repealed, 1992, c. 1, s. 146]

Offences and punishment

False statements or misuse of loans

(1) Every person who, in respect of a guaranteed business improvement loan,

1. knowingly makes any false statement or misrepresentation in an application or other document or wilfully furnishes any false or misleading information, or
2. being a borrower, uses the proceeds of the loan for a purpose other than that stated in that person's application for the loan,

is guilty of an offence under this Act and liable on summary conviction to a fine not exceeding one thousand dollars.

Limitation period

(2) A prosecution for an offence under this Act may be commenced at any time within but not later than three years after the time when the subject-matter of the complaint arose.

R.S., c. S-10, s. 9.

General

Payment out of C.R.F.

10.  Any amount payable by the Minister to a lender under this Act may be paid out of the Consolidated Revenue Fund.

R.S., c. S-10, s. 10.

Annual report

The Minister shall each year prepare a report with respect to the administration of this Act during the immediately preceding year, and shall lay the report before Parliament within fifteen days after it is made or, if Parliament is not then sitting, on any of the first fifteen days next thereafter that either House of Parliament is sitting.

R.S., c. S-10, s. 11.