Canada Small Business Financing Act (S.C. 1998, c. 36)

Short Title

Marginal note:Short title

1 This Act may be cited as the Canada Small Business Financing Act.

Interpretation

Marginal note:Definitions

2 The definitions in this section apply in this Act.

lender

lender means

• (a) a member of the Canadian Payments Association, established by subsection 3(1) of the Canadian Payments Act,

  • (i) referred to in paragraph 4(1)(b) or (c) or any of paragraphs 4(2)(a) to (c) of that Act, or

  • (ii) referred to in any of paragraphs 4(2)(d) to (h) of that Act if the member meets the prescribed conditions;

• (b) a local cooperative credit society, within the meaning of subsection 2(1) of the Canadian Payments Act, that is a member of a central cooperative credit society, within the meaning of that subsection, if that central cooperative credit society is a member of the Canadian Payments Association; or

• (c) any other organization designated by the Minister as a lender for the purposes of this Act. (prêteur)

loan

loan means a loan, including a line of credit, that meets the conditions set out in subsection 4(1) and is made to a borrower that meets the criteria set out in subsection 4(2). (prêt)

Minister

Minister means the member of the Queen’s Privy Council for Canada designated as the Minister for the purposes of this Act. (ministre)

prescribed

prescribed means prescribed by the regulations. (Version anglaise seulement)

small business

small business means a business carried on or about to be carried on in Canada with an estimated gross annual revenue

• (a) not exceeding $10 million or any prescribed lesser amount for the fiscal year of the business during which a loan is approved by a lender in respect of the business; or

• (b) in the case of a business about to be carried on, not expected at the time a loan is approved by a lender in respect of the business to exceed $10 million or any prescribed lesser amount for its first fiscal year that is of not less than 52 weeks duration.

It does not include the business of farming. (petite entreprise)

Application

Marginal note:Loans made after March 31, 1999

• 3 (1) This Act applies only in respect of loans made after March 31, 1999.

• Marginal note:Collection of annual administration fee

  (2) Notwithstanding subsection (1), section 12 applies, with the consent of the lender, in respect of any guaranteed business improvement loan that was made by that lender after March 31, 1995 under the Small Business Loans Act and that is outstanding after March 31, 1999.

• Marginal note:Claims for loss

  (3) Any provisions of the regulations with respect to interim claims apply in respect of claims submitted after March 31, 1999, notwithstanding that the claim may be in respect of a guaranteed business improvement loan made under the Small Business Loans Act.

• Marginal note:Deemed eligibility

  (4) Notwithstanding subsection (1), a loan is deemed to meet the conditions set out in subsection 4(1) and to be made to a borrower that meets the criteria set out in subsection 4(2) if

  • (a) the loan is approved before April 1, 1999 and is made on or after that date but before July 1, 1999; and

  • (b) either the loan meets the conditions set out in subsection 3(2) of the Small Business Loans Act that would have applied to the loan if it had been made before April 1, 1999, or subsection 3(7) of that Act would have applied with respect to the application of those conditions to the loan.

Eligibility

Marginal note:Loan conditions

• 4 (1) The following conditions must be satisfied in respect of a loan, in addition to any further conditions that may be prescribed:

  • (a) the loan must be made by and with the consent of a lender to a borrower who meets the eligibility criteria set out in subsection (2);

  • (b) the loan must be in respect of a small business;

  • (c) the loan must be for an expenditure or commitment that falls within the scope of one or more prescribed classes of loans; and

  • (d) the portion of the cost of the expenditures and commitments to be financed by the loan must not exceed the prescribed limits.

• Marginal note:Criteria for eligibility

  (2) A borrower is eligible for a loan on application to a lender if, at the time the loan is made,

  • (a) the borrower meets the prescribed eligibility criteria;

  • (b) in the case of a loan made before April 1, 2009, the outstanding loan amount in relation to the borrower does not exceed $250,000 or any prescribed lesser amount;

  • (c) in the case of a loan made after March 31, 2009 but before the day on which paragraph (d) comes into force, the outstanding loan amount in relation to the borrower does not exceed $500,000 or any prescribed lesser amount, of which a maximum of $350,000 or any prescribed lesser amount is for a purpose other than the purchase or improvement of real property or immovables of which the borrower is or will become the owner;

  • (d) in the case of a loan made after June 22, 2015 but before the day on which paragraph (e) comes into force, the outstanding loan amount in relation to the borrower does not exceed $1,000,000 or any prescribed lesser amount, of which a maximum of $350,000 or any prescribed lesser amount is for a purpose other than the purchase or improvement of real property or immovables of which the borrower is or will become the owner; and

  • (e) in the case of a loan made on or after the day on which this paragraph comes into force, the outstanding loan amount in relation to the borrower does not exceed $1,150,000 or any prescribed lesser amount, of which maximum amounts may be prescribed for a loan other than a line of credit, a line of credit and prescribed classes of loans.

• Marginal note:Meaning of outstanding loan amount

  (3) The outstanding loan amount referred to in any of paragraphs (2)(b) to (e) is the aggregate of the amount of the proposed loan and the principal amount outstanding, in respect of the borrower and all borrowers that are related to that borrower within the meaning of the regulations, of all loans made under this Act and guaranteed business improvement loans made under the Small Business Loans Act.

Liability of Minister

Marginal note:Liability of Minister

• 5 (1) Subject to subsection (2), the Minister is liable to pay a lender any eligible loss, calculated in accordance with the regulations, sustained by it as a result of a loan in respect of which the requirements set out in this Act and the regulations have been satisfied.

• Marginal note:Termination of liability

  (2) The Minister may, with the approval of the Governor in Council, give notice to a lender of the termination of the Minister’s liability in respect of loans of a prescribed class or of any prescribed classes made by the lender on or after the date set out in the notice.

• Marginal note:When notice to be given

  (3) A notice under subsection (2) is not effective unless the date set out in the notice is at least twenty-four hours after receipt of the notice at the head office of the lender.

Marginal note:Program liability ceiling

• 6 (1) The Minister is not liable to make any payment to a lender in respect of a loss sustained by it as a result of a loan made and registered after the Minister’s aggregate contingent liability in respect of the aggregate amount of the loans made by all lenders and registered by the Minister during each consecutive five-year period, starting with the period beginning on April 1, 1999, has exceeded $1.5 billion or any other amount that is provided by an appropriation Act or another Act of Parliament.

• Marginal note:Limitation of liability in respect of each lender — loans other than lines of credit

  (2) The liability of the Minister to make any payment to a lender in respect of losses sustained by it as a result of loans, other than lines of credit, made by it and registered by the Minister during each consecutive five-year period, starting with the period beginning on April 1, 1999, is limited to the total of

  • (a) 90%, or any prescribed lesser percentage, of that part of the aggregate principal amount of the loans — other than lines of credit — made by it during that period that does not exceed $250,000,

  • (b) 50%, or any prescribed lesser percentage, of that part of the aggregate principal amount of the loans — other than lines of credit — made by it during that period that exceeds $250,000 but does not exceed $500,000,

  • (c) 10%, or any prescribed lesser percentage, of that part of the aggregate principal amount of the loans — other than lines of credit — made by it before April 1, 2009 that exceeds $500,000, and

  • (d) 12%, or any prescribed lesser percentage, of that part of the aggregate principal amount of the loans — other than lines of credit — made by it after March 31, 2009 that exceeds $500,000.

• Marginal note:Limitation of liability in respect of each lender — lines of credit

  (3) The liability of the Minister to make any payment to a lender in respect of losses sustained by it as a result of lines of credit authorized by it and registered by the Minister during each consecutive five-year period, starting with the period beginning on April 1, 2019, is limited to the total of 15%, or any prescribed lesser percentage, of the aggregate amount of the lines of credit authorized by it.

Marginal note:Maximum loan size

• 7 (1) The Minister is not liable to make any payment to a lender, in respect of any loss sustained by it as a result of a loan made to a borrower, if the borrower has disclosed to the lender the outstanding amount of the loan or the lender has actual knowledge of that amount and if the outstanding loan amount in relation to the borrower is more than

  • (a) in the case of a loan made before April 1, 2009, $250,000 or any prescribed lesser amount;

  • (b) in the case of a loan made after March 31, 2009 but before the day on which paragraph (c) comes into force, $500,000 or any prescribed lesser amount, of which a maximum of $350,000 or any prescribed lesser amount is for a purpose other than the purchase or improvement of real property or immovables of which the borrower is or will become the owner;

  • (c) in the case of a loan made after June 22, 2015 but before the day on which paragraph (d) comes into force, $1,000,000 or any prescribed lesser amount, of which a maximum of $350,000 or any prescribed lesser amount is for a purpose other than the purchase or improvement of real property or immovables of which the borrower is or will become the owner; and

  • (d) in the case of a loan made on or after the day on which this paragraph comes into force, $1,150,000 or any prescribed lesser amount, of which maximum amounts may be prescribed for a loan other than a line of credit, a line of credit and prescribed classes of loans.

• Marginal note:Meaning of outstanding loan amount

  (2) The outstanding loan amount referred to in subsection (1) is the aggregate principal amount outstanding, in respect of the borrower and all borrowers that are related to that borrower within the meaning of the regulations, at the time the loan is made, of all loans made under this Act and guaranteed business improvement loans made under the Small Business Loans Act.

Marginal note:Loss-sharing ratio

8 The liability of the Minister in respect of losses sustained by a lender as a result of a loan made by it is limited to the lesser of

• (a) 85%, or any prescribed lesser percentage, of its eligible loss, calculated in accordance with the regulations, and

• (b) a prescribed maximum amount.

Marginal note:Other limitations — registration fee, etc.

• 9 (1) Subject to the regulations, the Minister is not liable to make any payment to a lender in respect of any loss sustained by it as a result of a loan made by it unless the lender has, in respect of that loan,

  • (a) paid to the Minister the registration fee in accordance with section 11; and

  • (b) complied with the other requirements of this Act and the regulations.

• Marginal note:Other limitations — annual administration fee

  (2) The Minister is not liable to make any payment to a lender in respect of any loss sustained by it as a result of a loan made by it unless the lender has, in respect of all loans made by it, paid to the Minister the annual administration fee in accordance with section 12.