Canada Small Business Financing Regulations

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.