1(1)The definitions in this subsection apply in these Regulations.Act means the Canada Small Business Financing Act. (Loi)borrower means a person who carries on or is about to carry on a small business to whom a loan has been made under the Act. It 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. (emprunteur)conventional loan means a loan that is not subject to the Act. (prêt ordinaire)equipment means equipment that is used or to be used in the course of carrying on a small business, and includes computer software, any ship, boat or other vessel used or to be used in navigation and water supply systems. It does not include inventory of the small business except inventory that is leased by the borrower to the borrower’s customers. (matériel)going concern means a small business that has carried on operations at any time within 60 days prior to purchase or, in the case of a small business that operates on a seasonal basis, during the season prior to purchase. (entreprise en exploitation)health care industry refers to a small business classified under the heading Major Group 86 – Health and Social Service Industries of the Standard Industrial Classification - Establishments (SIC-E) 1980 published by Statistics Canada. (industrie des soins médicaux) hospitality industry refers to a small business classified under the heading Major Group 91 – Accommodation Service Industries of the Standard Industrial Classification - Establishments (SIC-E) 1980 published by Statistics Canada. (industrie hôtelière)improvement includes construction, renovation and modernization and, with respect to equipment, installation. (amélioration)intangible asset means a non-monetary asset without physical substance that can be sold, transferred, licensed, rented or exchanged or that arises from a contractual or other legal right. (bien incorporel)loan agreement means any document described in section 10. (contrat de prêt)loan term means the period set out in a loan agreement for repayment of the total amount of the loan. (durée du prêt)mini-storage industry refers to a small business classified under the heading 479 – Other Storage and Warehousing Industries of the Standard Industrial Classification - Establishments (SIC-E) 1980 published by Statistics Canada. (industrie du mini-entreposage)responsible officer of the lender[Repealed, SOR/2009-102, s. 1]working capital costs means costs to fund the day-to-day operating expenses of a business. (frais liés au fonds de roulement)(2)Whether persons are at arm’s length from each other must, for the purposes of these Regulations, be determined in accordance with the Income Tax Act.(3)For the purposes of these Regulations, a loan is considered to have been made on the day on which the first disbursement of funds is made by the lender.SOR/2009-102, s. 1; SOR/2014-7, s. 1(F)SOR/2022-157, s. 1SOR/2024-64, s. 1

1.1(1)For the purposes of subsections 4(3) and 7(2) of the Act, borrowers are related when one borrower(a)controls, directly or indirectly in any manner, the other borrower;(b)is controlled, directly or indirectly in any manner, by the same person or group of persons as the other borrower;(c)carries on their small business in partnership with the other borrower, which carries on another small business; or(d)shares management services, administrative services, equipment, facilities or overhead expenses of the business with the other borrower, but is not in partnership with that borrower.(2)[Repealed, SOR/2022-157, s. 2](3)For the purpose of subsection (1), control means to hold shares of a corporation to which are attached more than 50% of the votes that are necessary to elect a majority of its directors.(4)Despite subsection (1), borrowers whose businesses are located at different premises are not related if neither borrower derives more than 25% of their actual or projected gross revenues from the other.SOR/2009-102, s. 2SOR/2022-157, s. 2

3(1)A loan registration form must be signed by the borrower and the lender and contain the following information:(a)the borrower’s name and the civic address and telephone number of the small business;(a.1)the names of the borrower’s shareholders and the names of the guarantors or suretyships referred to in sections 19 and 20;(b)the day on which(i)the loan was made, in the case of a loan referred to in any of paragraphs 5(1)(a) to (d), or(ii)the line of credit was opened by the lender, in the case of a loan referred to in paragraph 5(1)(e);(c)a statement setting out separately(i)the total amount of the loan,(ii)the estimated amount of the loan allocated to each class of loans referred to in paragraphs 5(1)(a) to (e), and(iii)the amount of the loan allocated to the class of loans referred to in paragraph 5(1)(f);(d)in the case of a loan referred to in any of paragraphs 5(1)(a) to (d), the total estimated cost of the purchase or improvement to be financed by the loan or, in the case of a loan referred to in paragraph 5(1)(e), the authorized amount of the line of credit;(e)[Repealed, SOR/2009-102, s. 3](f)the lender’s acknowledgement that the lender has not charged the borrower any fees or charges other than those authorized by the Act and these Regulations;(g)the borrower’s consent to(i)the Minister’s audit of the loan approval and administration file held by the lender in respect of the loan, and(ii)the release, by the Minister, of information with respect to the borrower’s outstanding loans, to another lender to whom the borrower applies for a loan;(h)the lender’s acknowledgement that, before making the loan, it verified within the branch where the loan was to be made or, if it has no branches, within its organization, that the outstanding loan amount in relation to the borrower does not exceed the applicable limit referred to in paragraph 4(2)(d) or (e) of the Act or in section 6.1;(i)the borrower’s acknowledgement that the outstanding loan amount in relation to the borrower does not exceed the applicable limit referred to in paragraph 4(2)(d) or (e) of the Act or in section 6.1;(i.1)in the case of a loan referred to in paragraph 5(1)(e), the borrower’s attestation that(i)the line of credit will only be used to pay for working capital costs, and(ii)the working capital costs paid through the line of credit were not incurred more than 365 days before the line of credit was authorized;(j)the borrower’s acknowledgement that the making of the loan is not prohibited by any of subsections 5(2), (4) or (6);(k)the lender’s acknowledgement that, before approving the loan, the lender acted in accordance with the due diligence requirements referred to in section 8.(l)[Repealed, SOR/2016-18, s. 1](2)If a loan registration form is transmitted by electronic means, it must include the electronic signature of the lender and contain the information set out in paragraphs (1)(a) to (l) and the following:(a)the borrower’s acknowledgement that the lender is authorized to transmit electronically the information contained in the form on behalf of the borrower and that the borrower has signed a copy of the form; and(b)the lender’s acknowledgement that it will keep a copy of the form that is signed by the borrower on file.(3)For the purposes of subsection (2), electronic signature has the same meaning as in subsection 31(1) of the Personal Information Protection and Electronic Documents Act.(4)A loan registration form must not be transmitted by electronic means unless it is transmitted through a designated secure electronic registration system.(5) and (6)[Repealed, SOR/2009-102, s. 3]SOR/2009-102, s. 3; SOR/2014-7, ss. 3, 28(F); SOR/2016-18, s. 1SOR/2022-157, s. 4SOR/2024-64, s. 2(E)

4(1)The registration fee is(a)in the case of a loan referred to in any of paragraphs 5(1)(a) to (d), 2% of the amount of the loan; and(b)in the case of a loan referred to in paragraph 5(1)(e), 2% of the authorized amount of the line of credit.(1.1)If the borrower and the lender renew a loan referred to in paragraph 5(1)(e) within five years after the day on which the line of credit is opened, the lender must pay an additional registration fee of 2% of the renewed authorized amount.(1.2)If the borrower and the lender agree to an increase in the authorized amount of a loan referred to in paragraph 5(1)(e), the lender must pay a registration fee of 2% of the increase in the authorized amount.(2)The annual administration fee is payable quarterly within two months after the end of each quarter and is calculated at the annual rate of 1.25% applied(a)in the case of a loan referred to in any of paragraphs 5(1)(a) to (d), to the end-of-month balances of the loan during the year; and(b)in the case of a loan referred to in paragraph 5(1)(e), to the daily outstanding amount for the line of credit for each month during the year.(3) to (6)[Repealed, SOR/2009-102, s. 4](7)With each payment made under subsection (2), the lender must submit a statement that substantiates the basis on which the payment was calculated.(8)Notwithstanding subsection (7), if the lender is unable to provide the statements required by that subsection in respect of a year, the Minister must notify the lender(a)that for that year, the lender may make the payments under subsection (2), except the payment for the last quarter of the year, on the basis of estimates of the amounts payable; and(b)that the lender must submit for that year a statement under subsection (9) rather than the statements required by subsection (7).(9)On or before June 1 following a year in respect of which a lender makes payments under subsection (8), the lender must pay any deficiency for the year and provide a statement that indicates the basis on which the amount of the annual administration fee for the year was calculated.(10)On application by a lender, made within one year after the day on which a loan referred to in any of paragraphs 5(1)(a) to (d) is made, the Minister must(a)where the lender has disbursed less than the full amount of the loan registered, refund to the lender that portion of the registration fee that is attributable to the portion of the loan that was not disbursed and subtract the amount of the undisbursed portion from the amount of the loan registered; or(b)where the lender determines that the loan is not in compliance with the requirements of the Act and these Regulations, refund to the lender the registration fee and the annual administration fee and delete the entire amount of the loan registered.(11)On application by a lender, made within one year after the day on which a loan referred to in paragraph 5(1)(e) is opened, the Minister must(a)where the lender has made available less than the amount of the loan registered, refund to the lender that portion of the registration fee that is attributable to the portion of the loan that was not made available and subtract the amount of the loan that was not made available from the amount of the loan registered; or(b)where the lender determines that the loan is not in compliance with the requirements of the Act and these Regulations, refund to the lender the registration fee and the annual administration fee and delete the entire authorized amount of the loan registered.SOR/2009-102, s. 4; SOR/2014-7, s. 4SOR/2022-157, s. 5

5(1)A loan must fall within one of the following prescribed classes:(a)loans to finance the purchase or improvement of real property or immovables of which the borrower is or will become the owner, if the purchase or improvement is necessary for the operation of the borrower’s small business;(b)loans to finance the purchase of leasehold improvements to real property or immovables of which the borrower is or will become the tenant or the improvement of such real property or immovables, if the purchase or improvement is necessary for the operation of the borrower’s small business;(c)loans to finance the purchase or improvement of equipment necessary for the operation of the borrower’s small business;(d)loans to finance the purchase of intangible assets and working capital costs;(e)lines of credit for working capital costs; or(f)loans to finance the payment by the borrower of registration fees payable in respect of a loan referred to in any of paragraphs (a) to (e).(2)A loan referred to in paragraph (1)(a) may not be made for the purchase of real property or immovables unless, at the time the loan is approved by the lender,(a)at least 50% of the area of the real property or immovables is used for the operation of the small business or is intended to be so used within 90 days after the final disbursement under the loan agreement; and(b)that portion of the area is not intended to be used within three years after the day on which the loan is made for(i)resale, or(ii)leasing or subleasing, except in the case of a small business in the health care industry, hospitality industry or mini-storage industry.(3)A loan referred to in paragraph (1)(a) for the purchase or improvement of real property or immovables may include the cost of decontamination of real property or immovables if(a)the decontamination is required under a federal or provincial law, and the decontamination plan is disclosed to the lender on or before the day on which the loan is made; and(b)[Repealed, SOR/2024-64, s. 3](4)A loan referred to in paragraph (1)(b) may not be made if the real property or immovables are intended to be used within three years after the day on which the loan is made for subleasing except in the case of a small business in the health care industry, hospitality industry or mini-storage industry.(5)The cost of purchasing or improving the equipment, real property, immovables or leasehold improvements financed by a loan referred to in any of paragraphs (1)(a) to (c) must not include the cost of labour provided by the borrower or the borrower’s employees but may include the cost of labour provided by any subcontractor.(6)A loan referred to in any of paragraphs (1)(a) to (d) may not be used to finance the payment of any refundable taxes.SOR/2009-102, ss. 5, 25(F); SOR/2014-7, ss. 5, 28(F)SOR/2022-157, s. 6SOR/2024-64, s. 3

6(1)A loan referred to in any of paragraphs 5(1)(a) to (e) may not be used to finance an expenditure or commitment that(a)arose more than 365 days before(i)the day on which the loan is approved, in the case of a loan referred to in any of paragraphs 5(1)(a) to (d), or(ii)the day on which the line of credit is authorized, in the case of a loan referred to in paragraph 5(1)(e); or(b)was previously financed by a conventional loan by the same lender.(2)The maximum loan term is(a)in the case of a loan referred to in any of paragraphs 5(1)(a) to (d), or in the case of a loan to finance the payment by the borrower of registration fees payable in respect of a loan referred to in any of paragraphs 5(1)(a) to (d), 15 years beginning on 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)(e), or in the case of a loan to finance the payment by the borrower of registration fees payable in respect of a loan referred to in paragraph 5(1)(e), five years beginning on the day on which the line of credit is opened.SOR/2009-102, s. 6; SOR/2016-18, s. 2SOR/2022-157, s. 7

9(1)The borrower must, before the loan is disbursed, 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 within 365 days before the loan is disbursed, of the value of the assets or services intended to improve the assets, as the case may be, if a borrower uses, or intends to use, all or part of a loan to purchase(a)assets, or services intended to improve the 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, leasehold improvements or intangible assets or to finance working capital costs, 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)[Repealed, SOR/2014-7, s. 7](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.SOR/2009-102, s. 9; SOR/2014-7, s. 7SOR/2022-157, s. 8

10(1)On or before the day on which a loan referred to in any of paragraphs 5(1)(a) to (d) is made, the lender and the borrower must sign a document that sets out the principal amount of the loan, the rate of interest payable, the repayment terms, the frequency of payments of principal and interest and the day on which the first payment of principal and interest is due.(1.1)On or before the day on which a loan referred to in paragraph 5(1)(e) is opened, the lender and the borrower must sign a document that sets out the authorized amount of the line of credit, the rate of interest payable, the repayment terms and, if applicable, the frequency of payments and the day on which the first payment is due.(2)The lender and the borrower may, at any time, agree to amend the terms of the loan or, at the end of a loan term, to renew the loan, to an aggregate maximum term of 15 years for a loan referred to in any of paragraphs 5(1)(a) to (d), beginning on the day on which the first payment of principal and interest is due.(3)On or before the day on which a loan is renewed or its terms are amended, the lender and borrower must sign a document that sets out the terms of the renewal or amendment.(4)For greater certainty, the terms described in subsections (1) and (3) may be set out in more than one document, as long as each document is signed by the lender and the borrower.(5)The repayment terms must provide that(a)the loan is payable by instalments;(b)at least one instalment of principal and interest is payable annually; and(c)the first instalment of principal and interest is payable no later than one year after the day on which the loan is made.(6)Before the end of the five year period that begins the day after a loan referred to in paragraph 5(1)(e) is opened, the lender and the borrower may(a)submit a new registration under section 2 for an additional five year term, along with the registration fee under subsection 4(1.1), if the additional five year term begins within five years after the day on which the line of credit is opened;(b)convert the line of credit to a loan that meets the requirements of subsections (1) and (3) to (5), with a maximum loan term of 10 years; or(c)enter into an agreement to repay the balance of the line of credit with a conventional loan.(6.1)Before the end of the additional five year term referred to in paragraph (6)(a), the lender and the borrower may(a)convert the line of credit to a loan that meets the requirements of subsections (1) and (3) to (5), with a maximum loan term of 10 years; or(b)enter into an agreement to repay the balance of the line of credit with a conventional loan.SOR/2009-102, s. 10; SOR/2014-7, ss. 8(F), 28(F); SOR/2016-18, s. 3SOR/2022-157, s. 9SOR/2024-64, s. 4

12(1)The maximum annual rate of interest payable in respect of a loan referred to in any of paragraphs 5(1)(a) to (d) on the day on which the loan is made or renewed or on which the loan term is amended, or on which a document is signed that sets out the terms of the loan that is made or renewed or that sets out the amended loan term, must not exceed(a)in the case of a floating rate loan, the aggregate of 3% and the prime lending rate that is in effect at that lender on each day of the loan term, beginning on the day on which the loan is made; and(b)in the case of a fixed rate loan, the aggregate of 3% and(i)the single family residential mortgage or hypothec rate in effect at that lender for the loan term, or(ii)in the case of a loan term of more than five years if there is no single family residential mortgage or hypothec rate for that loan term, the five-year single family residential mortgage or hypothec rate.(2)The maximum annual rate of interest payable in respect of a loan referred to in paragraph 5(1)(e) is the aggregate of 5% and the prime lending rate that is in effect at the lender on each day of the line of credit term, beginning on the day on which the line of credit is opened.SOR/2009-102, s. 12; SOR/2014-7, s. 9(F)SOR/2022-157, s. 10

13(1)A lender may require the borrower to pay to the lender, in addition to the registration fee referred to in section 11 of the Act,(a)any charge that would be charged by the lender for taking security in respect of a conventional loan of the same amount;(b)any premium under a life or disability insurance policy that provides that a benefit is or may become payable to the lender, if the lender pays the premium under the loan agreement;(c)any charge for the conversion of a conventional fixed rate loan to a conventional floating rate loan of the same amount, or a conventional floating rate loan to a conventional fixed rate loan of the same amount, or any charge for the prepayment of all or part of a loan that would be charged by the lender in respect of a conventional loan of the same amount; and(d)in the case of a loan made after March 31, 2014, any other charge that would be charged by the lender in respect of a conventional loan of the same amount.(2)If a charge referred to in paragraph (1)(a) or a premium referred to in paragraph (1)(b) is expressed as a percentage of the outstanding amount of the loan, the charge or premium must not be combined with the rate of interest payable in respect of the loan unless the percentage that is attributable to the charge or premium is clearly set out in the loan agreement.(3)[Repealed, SOR/2009-102, s. 13]SOR/2009-102, s. 13; SOR/2014-7, s. 10

14(1)A lender must, when making a loan referred to in paragraph 5(1)(a) or (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), (d) or (e), or a loan referred to in paragraph 5(1)(c) for the financing of computer software, the lender must 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 or opened, the lender makes or opens one or more conventional 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]SOR/2009-102, s. 25(F); SOR/2014-7, s. 11(F); SOR/2016-18, s. 4SOR/2022-157, s. 11

16(1)The lender may, in respect of a loan, release primary security in an asset if(a)the loan is in good standing; and(b)the outstanding amount of the loan has been reduced by the amount of the original cost of the asset that is to be released.(2)The lender may also release primary security in an asset at any time if(a)the asset is sold by the borrower to a person at arm’s length from the borrower and all of the proceeds of sale are applied to reduce the outstanding amount of the loan; or(b)the asset is sold by the borrower to a person not at arm’s length from the borrower and(i)the borrower provides to the lender an appraisal of the value of the asset made at any time within 180 days before the date of the sale by an appraiser who at that time met the professional qualifications and arm’s length requirements of subsection 9(1) or (2), as the case may be, and(ii)the outstanding amount of the loan is reduced by the greater of the proceeds of the sale and the appraised value of the asset.

19(1)A lender, in addition to the primary security referred to in section 14, may take one or more unsecured personal guarantees or suretyships for an amount of not more than the aggregate of(a)in the case of a loan made before April 1, 2014, 25% of the original amount of the loan, and in the case of a loan made after March 31, 2014, the original amount of the loan,(b)interest on any judgment against the guarantor or surety,(c)taxed costs for, or incidental to, the legal proceedings against the guarantor or surety, and(d)legal fees and disbursements — other than costs referred to in paragraph (c) — and other costs incurred by the lender for services rendered to it by persons other than its employees for the purpose of the legal proceedings against the guarantor or surety.(2)If a lender takes more than one personal guarantee or suretyship, the guarantees or suretyships must state that the aggregate liability of the guarantors or sureties may not exceed the aggregate amount referred to in subsection (1).SOR/2014-7, s. 12

25If the non-compliance described in any of the following paragraphs was inadvertent, the Minister must pay the lender the amount of any loss, calculated in accordance with subsection 38(7), on the portion of the amount of principal outstanding on the loan to which the non-compliance does not relate:(a)the loan was made to finance a purchase or improvement that does not fall within the scope of a class of loan referred to in subsection 5(1) or that is not permitted under subsection 6(1);(b)the conditions set out in subsection 5(3) were not satisfied in respect of a loan that included the cost of decontamination of real property or immovables;(c)[Repealed, SOR/2009-102, s. 15](d)the requirements with respect to security set out in these Regulations were not satisfied in respect of the loan; or(e)the lender has not provided all of the documentation described in subsection 38(4) in respect of a claim for the loss.SOR/2009-102, ss. 15, 25(F); SOR/2014-7, s. 13; SOR/2016-18, s. 5

25.1(1)Despite the fact that the requirements with respect to appraisals set out in section 9 or subsection 16(2) have not been satisfied in respect of a loan, the Minister must pay the lender the amount of any loss, calculated in accordance with subsection 38(7), sustained in respect of the loan if(a)the non-compliance was inadvertent; and(b)the lender provides the Minister with documentation that substantiates the value of the assets or services intended to improve the assets, as the case may be, during the period of 365 days before the loan was disbursed by the lender or on the day the loan was disbursed.(2)Subsection (1) does not apply to appraisals of real property or immovables.(3)Despite the fact that the lender has not provided the documentation referred to in paragraph (1)(b), the Minister must pay the lender the amount of any loss, calculated in accordance with subsection 38(7), on the portion of the amount of principal outstanding on the loan to which the non-compliance does not relate.SOR/2009-102, s. 16; SOR/2014-7, s. 14SOR/2022-157, s. 13

25.3Despite the fact that the primary security taken by the lender is not enforceable, the Minister must pay the lender the amount of any loss resulting from the loan, calculated in accordance with subsection 38(7), on the portion of the amount of principal outstanding on the loan to which the non-compliance relates if(a)the non-compliance was inadvertent;(b)the requirements set out in section 14 with respect to the validity and ranking of the security are complied with; and(c)the lender provides the Minister with documentation that substantiates the following:(i)the lender, or their agent or mandatary, performed, during the period beginning 30 days before the day on which the loan was approved and ending 90 days after the final disbursement under the loan agreement, an on-site or virtual visit of the premises where the borrower’s small business is carried on or about to be carried on, and(ii)the lender, or their agent or mandatary, confirmed that the assets for which the loan under subsection 5(1) was approved were delivered to and, if required, installed at the premises where the borrower’s small business is carried on or about to be carried on at the time of the on-site visit.SOR/2014-7, s. 16SOR/2022-157, s. 14

26(1)Subject to subsection (3), in the case where the requirements with respect to guarantees and suretyships set out in sections 19 to 22 were not satisfied in respect of a loan made before April 1, 2014, the Minister must pay the lender the amount of any loss resulting from the loan, calculated in accordance with subsection 38(7) if(a)the loss was not affected by the non-compliance and the non-compliance was inadvertent; and(b)the aggregate amount recovered from the realization of personal guarantees and suretyships, if any, is not greater than the sum of(i)25% of the original amount of the loan,(ii)interest on any judgment against the guarantor or surety,(iii)taxed costs for, or incidental to, the legal proceedings against the guarantor or surety, and(iv)legal fees and disbursements — other than costs referred to in subparagraph (iii) — and other costs incurred by the lender for services rendered to it by persons other than its employees for the purpose of the legal proceedings against the guarantor or surety.(2)Subject to subsection (3), in the case where the requirements with respect to guarantees and suretyships set out in sections 19 to 22 were inadvertently not satisfied in respect of a loan made after March 31, 2014, the Minister must pay the lender the amount of any loss resulting from the loan, calculated in accordance with subsection 38(7), less the guarantee and suretyship taken but not realized due to the non-compliance.(3)In the case where the lender has taken a secured personal guarantee or suretyship, the Minister must pay the lender the amount of any loss resulting from the loan calculated in accordance with subsection 38(7) if(a)the lender has inadvertently taken a secured guarantee or suretyship; and(b)the lender has not realized on, and has released, the security on the guarantee or suretyship.SOR/2009-102, s. 24(F); SOR/2014-7, s. 16

27(1)If the conditions set out in subsection (2) have been met, the Minister must pay the lender the amount of any loss, calculated in accordance with subsection 38(7), sustained in respect of a loan despite any of the following non-compliances:(a)[Repealed, SOR/2009-102, s. 17](b)a fee or charge is payable, other than a fee or charge referred to in section 10 of the Act;(c)the rate of interest payable in respect of the loan is greater than the rate provided by section 12;(d)a charge or premium referred to in paragraph 13(1)(a) or (b) is combined with the rate of interest payable in respect of the loan, when the charge or premium is expressed as a percentage of the outstanding amount of the loan and when the percentage that is attributable to the charge or premium is not clearly set out in the loan agreement;(e)the costs required to convert the loan into a fixed rate or variable rate loan or for the prepayment of all or part of the loan exceed the costs that the lender would impose if it were a loan of the same amount; or(f)costs are charged that are not imposed on an ordinary loan of the same amount or that exceed the costs that would be imposed on an ordinary loan of the same amount.(2)The Minister must make a payment to a lender under subsection (1) if(a)the loss was not affected by the non-compliance and the non-compliance was inadvertent;(b)the lender has reimbursed the borrower for any resultant overcharges, unless the lender has provided the Minister with documentation that substantiates the fact that it is unable to locate the borrower; and(c)the lender has otherwise remedied the non-compliance.SOR/2009-102, ss. 17, 24(F); SOR/2014-7, s. 17

28.1When 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 any of paragraphs 5(1)(a) to (d), or in the case of a loan to finance the payment by the borrower of registration fees payable in respect of a loan referred to in any of paragraphs 5(1)(a) to (d), within 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)(e), or in the case of a loan to finance the payment by the borrower of registration fees payable in respect of a loan referred to in paragraph 5(1)(e), within five years after the day on which the line of credit is opened by the lender or before the expiry of any renewal agreement referred to in subsection 10(6).SOR/2009-102, s. 18; SOR/2016-18, s. 7SOR/2022-157, s. 16

29(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) or (3) 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. 18SOR/2022-157, s. 17

30(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),(a)the loan term for a loan referred to in any of paragraphs 5(1)(a) to (d) 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; and(b)the loan term for a loan referred to in paragraph 5(1)(e) is the period beginning on the day on which the loan is opened by the other lender.(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. 8SOR/2022-157, s. 18

31(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

33(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 (e) of the Act or in section 6.1;(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 (e) of the Act or in section 6.1;(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 (e) of the Act or in section 6.1;(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. 9SOR/2022-157, s. 19

37(1)[Repealed, SOR/2022-157, s. 20](2)If a borrower is in default under section 36, the lender must demand repayment of the outstanding amount of the loan within the period specified in the demand before submitting a claim for loss sustained as a result of a loan under section 38.(3)If the outstanding amount of the loan is not repaid within the period specified, the lender must take any of the following measures that will minimize the loss sustained by it in respect of the loan or that will maximize the amount recovered:(a)collect the principal and interest outstanding on the loan;(b)fully realize any security, guarantee or suretyship;(c)realize on any insurance policy under which the lender is the beneficiary;(d)fully implement a compromise settlement with the borrower or with a guarantor or surety or any other person on behalf of the borrower, guarantor or surety; and(e)subject to subsection (4), take legal proceedings, including the enforcement of any resulting judgment, if the estimated cost of the proceedings is not greater than the estimated amount that may be recovered.(4)If the borrower is a partnership or a sole proprietor, the lender may not execute a judgment by realizing on the assets (other than the assets of the small business in respect of which the loan is made) of the partners or sole proprietor, in an amount greater than the sum of(a)in the case of a loan made before April 1, 2014, 25% of the original amount of the loan and in the case of a loan made after March 31, 2014, the original amount of the loan,(b)interest on the judgment,(c)taxed costs for, or incidental to, the legal proceedings against the borrower, and(d)legal fees and disbursements — other than costs referred to in paragraph (c) — and other costs incurred by the lender for services rendered to it by persons other than its employees for the purpose of the legal proceedings against the borrower.SOR/2009-102, s. 21; SOR/2014-7, s. 23SOR/2022-157, s. 20SOR/2024-64, s. 5(F)

38(1)A lender must take all of the measures described in subsection 37(3) that are applicable before submitting a claim to the Minister for loss sustained as a result of a loan.(2)Regardless of the nature of the default, a lender must submit a claim for loss within 60 months after the day on which the last payment on the loan is received or, if the borrower has made no payment on the loan, 60 months after the day on which the first payment is scheduled.(3)The Minister is authorized to extend the 60-month period if the lender requests the extension before that period expires.(4)A claim for loss must be certified by the lender and be accompanied by(a)in the case of a loan referred to in any of paragraphs 5(1)(a) to (d), documentation that substantiates(i)the cost and proof of payment of the purchase or improvement that was financed by the loan in an amount equal to or greater than 75% of the principal outstanding on the loan, and(ii)the amount disbursed by the lender under the loan agreement;(a.1)in the case of a loan referred to in paragraph 5(1)(e),(i)an attestation signed by the borrower stating that(A)the line of credit will only be used to pay for working capital costs, and(B)the working capital costs paid through the line of credit were not incurred more than 365 days before the line of credit was authorized, and(ii)documentation that substantiates the amount provided by the lender under the loan agreement;(b)a copy of the loan record; and(c)the loan approval and administration file, if requested by the Minister.(5)A claim for loss must include the lender’s acknowledgement that it has acted with due diligence in applying the procedures referred to in section 8 and has taken the measures described in subsection 37(3).(6)A claim for loss must include all documents that evidence the security taken by the lender in respect of the loan and all guarantees and suretyships taken by the lender in respect of the loan.(7)A loss sustained by a lender in respect of a loan must be calculated by determining the aggregate of the following amounts and deducting from that aggregate amount the proceeds realized from the taking of any measures described in subsection 37(3) and any overcharges referred to in paragraph 27(2)(b) that have not been reimbursed to the borrower:(a)the amount of principal outstanding on the loan;(b)the amount of interest due and not paid pursuant to the loan agreement, calculated in accordance with subsection (8);(c)uncollected taxed costs for, or incidental to, any legal proceedings in respect of the loan; and(d)legal fees and disbursements, other than the costs referred to in paragraph (c), and other costs incurred by the lender for services rendered to it by persons other than its employees, for the purpose of collecting, or attempting to collect, the loan from the borrower or the guarantor or surety.(8)The amount of interest referred to in paragraph (7)(b) is calculated as follows:(a)in respect of the period beginning on the day after the last day on which interest is current and ending on the day of the first scheduled payment date after that day, at the rate of interest in effect under the loan agreement on the last day on which interest is current,(b)in respect of the 12-month period immediately following the period referred to in paragraph (a), at the rate of interest in effect under the loan agreement on the first day of the 12-month period,(c)in respect of the 12-month period immediately following the period referred to in paragraph (b), at a rate of interest equal to one half of the rate of interest referred to in that paragraph, and(d)in respect of any period following the period referred to in paragraph (c), at a rate of interest of 0%.SOR/2009-102, s. 22; SOR/2014-7, s. 24; SOR/2016-18, s. 10SOR/2022-157, s. 21SOR/2024-64, s. 6

38.1(1)If the Minister has paid the lender the amount of any loss, calculated in accordance with subsection 38(7), the lender may, within the applicable period set out below, submit an additional claim for part of the previously unclaimed loss if the failure to respect the deadline for claiming that part of the loss was inadvertent:(a)in the case where the lender has notified the Minister of recovery of 100% of the compromise settlement, guarantee or suretyship under subsection 39(4), within 12 months after the day of notification;(b)in the case where the lender has submitted a final claim under subsection 39(5) after an interim claim, within 12 months after the day on which the claim was made final; and(c)in any other case, within 12 months after the date of expiry of the period specified in subsection 38(2) or (3), as the case may be.(2)An additional claim for part of the loss arising from any amount paid as a result of a claim submitted under a deemed trust by the Canada Revenue Agency or by any provincial department of revenue may be submitted after the period specified in subsection (1).(3)An additional claim for part of the loss must be certified by the lender and be accompanied(a)in the case of an additional claim submitted under subsection (1) in respect of a loan referred to in any of paragraphs 5(1)(a) to (d), by documentation that substantiates(i)the cost and proof of payment of the purchase or improvement that was financed by the loan in an amount equal to or greater than 75% of the principal outstanding on the loan, and(ii)if appropriate, the costs referred to in paragraphs 38(7)(c) and (d) that were not previously claimed;(a.1)in the case of an additional claim submitted under subsection (1) in respect of a loan referred to in paragraph 5(1)(e),(i)by an attestation signed by the borrower stating that(A)the line of credit will only be used to pay for working capital costs, and(B)the working capital costs paid through the line of credit were not incurred more than 365 days before the line of credit was authorized, and(ii)if appropriate, by documentation that substantiates the costs referred to in paragraphs 38(7)(c) and (d) that were not previously claimed; and(b)in the case of an additional claim submitted under subsection (2), by documentation that substantiates(i)the amount paid as a result of a claim submitted under a deemed trust by the Canada Revenue Agency or by any provincial department of revenue, and(ii)if appropriate, the costs referred to in paragraphs 38(7)(c) and (d) that were not previously claimed.SOR/2014-7, s. 25; SOR/2016-18, s. 11SOR/2022-157, s. 22

39(1)A lender may make an interim claim to the Minister in accordance with this section for loss sustained as a result of a loan where the lender has taken all of the measures described in subsection 37(3) that are applicable and(a)paragraph 37(3)(b) applies but the guarantee or suretyship has not been fully realized; or(b)paragraph 37(3)(d) applies but the compromise settlement has not been fully implemented.(2)The Minister must pay the interim claim as if the lender had fully implemented the compromise settlement or fully realized the guarantee or suretyship at the time the interim claim is submitted.(3)Subsections 38(2) to (8) apply, with any modifications that the circumstances require, in respect of the submission of an interim claim.(4)If, after the interim claim is paid, the lender, by fully implementing the compromise settlement or fully realizing the guarantee or suretyship, recovers 100% of the compromise settlement, guarantee or suretyship, the lender must so notify the Minister and the interim claim is deemed to be a final claim.(5)If, after the interim claim is paid, the lender, by fully implementing the compromise settlement or fully realizing the guarantee or suretyship, recovers less than 100% of the compromise settlement, guarantee or suretyship, the lender may submit a final claim under section 38 for the difference.SOR/2014-7, s. 26(E)SOR/2022-157, s. 23

40(1)When the Minister pays a lender for a loss sustained by it as a result of a loan, Her Majesty is subrogated from the payment of the final claim for the loss to the rights of the lender up to the amount paid by the Minister.(2)If, after the Minister makes the payment, additional proceeds are realized from the taking of any measures by the lender described in subsection 37(3), the Minister must be paid an amount equal to 85% of the proceeds and the lender must be paid an amount equal to 15%.(3)The payment made to the Minister under subsection (2) is to be taken into account in determining the losses sustained by the lender on loans made after March 31, 2009 when calculating the Minister’s limit of liability with respect to the lender under subsection 6(2) of the Act.SOR/2009-102, s. 23; SOR/2014-7, s. 27