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![]() Small Business Loans ActRegulations, 1993 - applicable to loans made after March 31, 1993
Small Business Loans Act Small Business Loans Regulations, 1993 SOR/93-169 Registration 30 March, 1993 SMALL BUSINESS LOANS ACT Small Business Loans Regulations, 1993 P.C. 1993-622 30 March, 1993 His Excellency the Governor General in Council, on the recommendation of the Minister of Industry, Science and Technology, the Minister for the purposes of the Atlantic Canada Opportunities Agency Act, the Minister of National Health and Welfare, the Minister of Western Economic Diversification and the Minister of Finance, pursuant to section 7* of the Small Business Loans Act**, is pleased hereby to make the annexed Regulations respecting business improvement loans to small businesses, effective April 1, 1993. * S.C. 1993, c. 6, s. 5 ** S.C. 1993, c. 6, s. 1 REGULATIONS RESPECTING BUSINESS IMPROVEMENT LOANS TO SMALL BUSINESSES 1. These Regulations may be cited as the Small Business Loans Regulations, 1993. 2. In these Regulations,
3. The following equipment is prescribed as included in the definition "equipment" in section 2 of the Act:
4. Subject to section 24, these Regulations apply to a guaranteed business improvement loan made after March 31, 1993. 5. Where the fiscal period of a business enterprise is less than 365 days, the fiscal period of the business enterprise shall, for the purposes of the Act, begin on the first day of the fiscal period and end on the three hundred and sixty-fifth day. PRESCRIBED CLASSES OF GUARANTEED BUSINESS IMPROVEMENT LOANS 6. The following classes of guaranteed business improvement loans are hereby prescribed:
7. A loan is a land loan where
8. A loan is an equipment loan where
9. A loan is a premises loan where
10. A loan is a fees loan where it is made to a proprietor for the purpose of financing the payment of the fee required by paragraph 3(4)(b) of the Act in conjunction with a loan referred to in section 7, 8 or 9. SOR/95-81, s. 6. 11. Where a borrower uses, or intends to use, the amount of a loan of a prescribed class, or a portion of the loan, to acquire assets from a person not at arm's length, within the meaning of that term in the Income Tax Act, the lender shall, at the time of making the loan, require an independent appraisal of the value of those assets and shall base the amount of the loan on the lesser of the amount of the appraisal and the cost of the purchase or acquisition. SOR/95-81, s. 6. TERMS OF LOANS OF A PRESCRIBED CLASS 12. (1) A lender shall, at the time of making a disbursement on a loan of a prescribed class, require that the borrower sign a promissory note that sets out the principal amount of the disbursement, the rate of interest payable on the loan and the repayment terms. (2) Where the repayment terms set out in the promissory note referred to in subsection (1) provide that a loan is payable by instalments, at least one instalment shall be paid annually. (3) Where the amount of a loan of a prescribed class is advanced by more than one disbursement, the first instalment on the principal amount of the loan shall be payable no later than on a day which is one year after the day on which the initial disbursement is advanced. (4) Where a loan has a term of less than 10 years, the lender may renew it for additional terms, at an interest rate not exceeding the maximum rate calculated under section 14 as at the renewal date, to an aggregate maximum term of ten years, calculated as of the date of the first scheduled principal instalment under the loan. (5) A loan made with an interest rate calculated in accordance with paragraph 14(a) may, with the consent of the borrower, be converted to a loan with an interest rate calculated in accordance with paragraph 14(b). (6) A loan made with an interest rate calculated in accordance with paragraph 14(b) may, with the consent of the borrower, be converted to a loan with an interest rate calculated in accordance with paragraph 14(a) and the lender may impose a charge for the conversion in an amount not exceeding the greater of
(7) Where the borrower prepays the loan other than by means of instalments of up to 10 per cent per annum of the original amount of the loan on the anniversary date of the loan and on a non-cumulative basis, the lender may charge a prepayment penalty in an amount not exceeding the greater of
13. (1) Where there is actual or impending default in the repayment of a loan of a prescribed class, the lender and the borrower may agree to alter or revise the repayment terms of the loan. (2) Where the lender and the borrower agree to revise the repayment terms of a loan of a prescribed class by extending the time of the repayment beyond the period provided for in paragraph 3(2)(e) of the Act, it is a condition of the Minister's liability under the Act that the approval of the Minister shall be obtained in writing prior to the extension. SOR/95-81, s. 8. 14. The maximum annual rate of interest payable as set out in the first promissory note signed pursuant to subsection 12(1) shall not exceed
15. (1) Where a lender, under the terms of a loan of a prescribed class or an agreement in connection with the loan, pays an insurance premium under a policy which provides that a benefit is or may become payable to the lender, the lender may charge the amount of the premium to the borrower. (2) Where an insurance premium is expressed as a percentage of the outstanding amount of a loan of a prescribed class, it may be combined with the rate of interest, where the resultant rate of interest, as set out in the promissory note referred to in subsection 12(1), does not exceed the maximum rate prescribed in section 14. SOR/95-81, s. 10. 16. (1) Subject to subsection (2) a lender shall, at the time of making a loan of a prescribed class other than a fees loan, take, as security for the repayment of the loan, a mortgage, conditional sales contract, pledge, debenture, general security agreement or other similar security on the assets of the business enterprise that will be financed by the loan. (2) Where the loan is a land or premises loan and the borrower is a tenant, the lender may take, as security for the repayment of the loan, security on any other assets of the business enterprise. (3) Where there is existing security on the assets to be secured, the security referred to in subsections (1) and (2) shall be a fixed charge of the highest available rank. (4) Where there is no existing security on the assets to be secured, the security referred to in subsections (1) or (2) shall be a first fixed charge, or a fixed charge equal in priority to other sources of financing. (5) A lender, in addition to the security referred to in subsection (1), (2) or (6), may take unsecured personal guarantees for an amount that in the aggregate does not exceed 25 per cent of the amount of a loan. (6) A lender, in addition to the security referred to in subsection (1), (2) or (5), may take corporate guarantees. (7) A lender may substitute any security taken in accordance with subsection (1), (2), (5) or (6) for any other security referred to in any of those subsections and may substitute for assets secured thereby any other assets if the value of the substituted assets is not less than the value of the assets that are released from the security. (8) In an equipment loan, any assets secured by the lender may be released by the lender if
(9) In a land or premises loan, any assets secured by the lender under subsection (1), (2) or (6) may be released if the assets are expropriated, provided that the proceeds of the expropriation are applied to the loan. (10) A lender may release an unsecured personal guarantee taken in accordance with subsection (5) if the loan is in good standing and the borrower has repaid to the lender at least 50 per cent of the principal amount of the loan. SOR/95-81, s. 11; SOR/96-59, s. 2. 17. Subject to subsection 13(1), where a borrower is in default in respect of any payment due on a loan of a prescribed class, the balance outstanding on the loan shall be due and payable. 18. (1) Where the balance outstanding on a loan of a prescribed class is due and payable pursuant to section 17, the lender shall demand repayment of the balance owing by the borrower within such period as specified in the demand. (2) Where the repayment demanded under section (1) is not made within the period specified in the demand, the lender shall take all of the following applicable steps;
(3) Where the borrower is a partnership or a sole proprietor, the lender may realize upon the assets, other than the assets of the business enterprise, of the partners or sole proprietor in an amount not exceeding in aggregate 25 per cent of the amount of the loan. SOR/95-81, s. 12. 19. (1) A lender may not submit a claim to the Minister for loss sustained as a result of a loan of a prescribed class before taking all of the applicable steps described in subsection 18(2). (2) Subject to subsection (3), the lender shall submit any claim for loss within a period of 36 months following the day on which default in repayment of the loan occurred. (3) The Minister may, at the lender's request, extend the period referred to in subsection (2) by not more than six months. (4) A claim for loss shall be certified by a responsible officer of the lender and shall be accompanied by
(5) A loss sustained by the lender in respect of a loan of a prescribed class shall be calculated by determining the aggregate of the following and deducting from that aggregate any proceeds realized from the steps taken that are referred to in subsection 18(2):
20. Any lender who has made a loan of a prescribed class shall provide, before June 1 of any year, a report to the Minister on the total amount of the loans of all prescribed classes unpaid on March 31 of the year. 21. Where the Minister compensates a lender for all or any part of the loss sustained by the lender as a result of a loan of a prescribed class, Her Majesty is subrogated to the rights of the lender in respect of that loan. 22. For the purposes of these Regulations, the registry established by the Minister pursuant to the Small Businesses Loans Regulations, made by Order in Council P.C. 1960-1764 of December 22, 1960, in order to provide for the recording of loans made under the Act, is hereby continued. LOAN REGISTRATION REQUEST AND REQUIRED FEES 23. (1) The lender shall within three months following the day on which the initial disbursement of a loan of a prescribed class is advanced in accordance with the terms of the loan, request, in writing, that the Minister register the loan. (2) Where the Minister is unable to register a loan of a prescribed class because the lender has inadvertently failed to request registration within the period set out in subsection (1), or to pay the fee required by paragraph 3(4)(b) of the Act, the Minister may, if the borrower is not in default, extend the period for registration to a day not more than one year after the day on which the initial disbursement was advanced. SOR/95-81, s. 14. 23.1 For the purposes of paragraph 3(4)(b) of the Act, the registration fee in respect of a loan, other than a fees loan, made after December 31, 1995 is two per cent of the amount of the loan and is payable at the time the loan is submitted for registration. SOR/95-155, s. 2; SOR/96-59, s. 4. 23.2 For the purposes of paragraph 3(4)(c) of the Act, the annual administration fee in respect of a loan made after December 31, 1995 is 1.25 per cent of the yearly average of the end-of-month loan balances and is payable at the time of filing of the report referred to in section 20. SOR/96-59, s. 4. ACQUISITION OF LOANS BY ANOTHER LENDER 24. (1) Where a lender who has made loans of a prescribed class discontinues its lending business and sells all loans of the prescribed class outstanding on its books to another lender who is the successor lender, or amalgamates with one or more other lenders so as to form a new lender, the Minister's liability under the Act continues in favour of that successor lender or the new lender, and on the day of the sale or the amalgamation
(2) A lender may, at the request of the borrower, transfer to another lender a land, premises or equipment loan and its related fees loan, which when taken with all other loans transferred to or by each of the lenders do not exceed respectively in the aggregate the greater of 20 loans and one per cent of the number of loans outstanding for each lender as of the last preceding March 31. (3) A lender who acquires a loan under subsection (2) shall, within three months after the acquisition of the loan, notify the Minister of the acquisition and of the amount outstanding on the loan. (4) The liability of the Minister under the Act continues to the lender who acquires the loan. SOR/95-81, s. 15; SOR/96-59, s. 5(E). |
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Created: 2004-07-29 Updated: 2005-02-11 ![]() |
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