name: Canada Small Business Financing Act
unofficial_text: # Canada Small Business Financing Act
  
  SC 1998, c 36
  
  An Act to increase the availability of financing for the establishment, expansion, modernization and improvement of small businesses
  
  Assented to 1998-12-10
  
  Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows: 
  
  ## Short Title 
  
  ### Short title
  
  1 This Act may be cited as the Canada Small Business Financing Act.  
  
  ## Interpretation 
  
  ### Definitions
  
  2 The definitions in this section apply in this Act.  
  *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* 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* means the member of the Queen’s Privy Council for Canada designated as the Minister for the purposes of this Act. (ministre)   
  *prescribed* means prescribed by the regulations. (Version anglaise seulement)   
  *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 
  
  ### Loans made after March 31, 1999
  
  3 (1) This Act applies only in respect of loans made after March 31, 1999. 
  
  ### 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.  
  
  ### 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.  
  
  ### 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 
  
  ### 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. 
  
  ### 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. 
  
  ### 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 
  
  ### 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. 
  
  ### 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. 
  
  ### 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. 
  
  ### 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. 
  
  ### 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. 
  
  ### 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. 
  
  ### 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. 
  
  ### 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.  
  
  ### 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. 
  
  ### 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. 
  
  ### 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. 
  
  ## Fees and Charges 
  
  ### Condition re: fees and charges
  
  10 Every loan is subject to the condition that no fee or charge is payable by a borrower in respect of the loan other than 
  (a) interest; 
  (b) the registration fee; and 
  (c) any other prescribed fee or charge that is specified in the regulations as being payable by the borrower. 
  
  ### Registration fee
  
  11 Every lender shall pay to the Minister, at the time a loan made by that lender is submitted for registration, a registration fee of an amount calculated in accordance with the regulations in respect of the loan. The registration fee may be charged by the lender to the borrower. 
  
  ### Annual administration fee
  
  12 Every lender shall, in accordance with the terms and conditions set out in the regulations, pay to the Minister, in respect of a loan, an annual administration fee of an amount calculated in accordance with the regulations. The lender may not charge the borrower for that fee otherwise than through the imposition of interest in respect of the loan. 
  
  ## Pilot Projects 
  
  ### Regulations
  
  13 (1) Notwithstanding anything in this Act, the Governor in Council may, on the recommendation of the Minister, make any regulations that the Governor in Council considers necessary respecting the establishment and operation of one or more pilot projects for testing whether to guarantee loans made to borrowers in the voluntary sector or capital leases and to determine the legislative and regulatory measures required to do so. 
  
  ### Program liability ceiling
  
  (2) The Minister’s maximum aggregate contingent liability in respect of a pilot project may be established by an appropriation Act or another Act of Parliament. 
  
  ### Maximum duration of pilot projects
  
  (3) Subject to subsection (4), regulations made under subsection (1) have a maximum duration of five years from the time they come into force. 
  
  ### Extension of regulations
  
  (4) If, as a result of a pilot project referred to in subsection (1), the Minister decides to guarantee loans made to borrowers in the voluntary sector or capital leases, the Minister shall cause to be published in the Canada Gazette a notice of that decision and the regulations made under that subsection in relation to that pilot project will continue to have effect until the earlier of  
  (a) the coming into force of the legislative and regulatory measures referred to in that subsection, and 
  (b) one year after the day on which they would otherwise cease to have effect. 
  
  ### Tabling of proposed regulations
  
  (5) The Minister shall cause a copy of each regulation proposed to be made under subsection (1) to be laid before each House of Parliament before it is made and that House shall refer the proposed regulations to the appropriate Committee of each House. 
  
  ## Regulations 
  
  ### Regulations
  
  14 (1) The Governor in Council may, subject to subsection (2), on the recommendation of the Minister, make regulations for carrying out the purposes and provisions of this Act and, without limiting the generality of the foregoing, may make regulations 
  (a) authorizing the Minister to designate organizations as lenders; 
  (b) prescribing classes of loans; 
  (c) respecting loan application, loan registration and claims forms, including the information to be included in such forms; 
  (d) respecting the further conditions for eligibility referred to in subsection 4(1); 
  (e) respecting limits referred to in paragraph 4(1)(d); 
  (f) respecting eligibility criteria for borrowers; 
  (g) respecting the calculation of eligible loss; 
  (h) respecting the extent of the Minister’s liability in respect of a loan where certain provisions of this Act or the regulations have not been complied with, including prescribing conditions that may be attached to that liability; 
  (i) respecting the making of loans, including loan approval, maximum loan terms, repayment requirements and security requirements, including guarantees and suretyships; 
  (j) respecting the maximum rates of interest payable in respect of a loan; 
  (k) respecting the registration and administration of loans, including in respect of default, recovery, claims for loss by lenders and payment of claims by the Minister, including interim claim payments; 
  (l) authorizing the Minister to extend the prescribed period within which a claim may be submitted; 
  (m) respecting registration and annual administration fees that are payable under this Act, including prescribing their calculation and payment, including the time when and the manner in which the fees and charges shall be paid, the additional fees that may be charged for the late payment of the fees and charges, the refunding of fees and charges and the circumstances in which any fees and charges previously paid may be refunded in whole or in part; 
  (n) respecting fees and charges, including insurance premiums and charges for putting security in place, that are payable by the borrower; 
  (o) respecting audits and examinations; 
  (p) respecting the submission of documents, information, reports, fees and charges; 
  (q) respecting documents, information, records and books of account to be kept by lenders; 
  (r) respecting documents, information and reports to be provided under this Act; 
  (s) providing for the acquisition, assumption, transfer or assignment of loans, including the attachment of terms and conditions to those acts and the adjustment of the Minister’s liability; 
  (t) respecting, in the case of an amalgamation of lenders, the adjustment of the Minister’s liability in respect of loans made by those lenders; 
  (u) respecting the subrogation of Her Majesty in the rights of a lender with respect to a loan; 
  (v) respecting the meaning of “related” for the purposes of subsections 4(3) and 7(2); and 
  (w) prescribing anything that by this Act is to be prescribed. 
  
  ### Ministerial recommendation
  
  (2) Regulations under paragraph (1)(j) shall be made on the recommendation of the Minister and the Minister of Finance. 
  
  ### Tabling of proposed regulations
  
  (3) The Minister shall cause a copy of each regulation proposed to be made under subsection (1) to be laid before each House of Parliament before it is made and that House shall refer the proposed regulations to the appropriate Committee of each House. 
  
  ## Audit or Examination 
  
  ### Minister’s powers
  
  15 (1) The Minister may, after giving at least twenty-one days notice in writing to a lender, conduct an audit or examination of the lender’s documents, records and books of account to verify that this Act and the regulations are being complied with in respect of a loan, including that the lender has exercised due diligence, as provided in the regulations, in the approval and administration of the loan and that the documentation submitted to the Minister in respect of the borrower is accurate and complete. 
  
  ### Records to be made available
  
  (2) The documents, records and books of account shall, for the purposes of the audit or examination, be made available at all reasonable times to any person authorized by the Minister for the purpose. 
  
  ### Assisting authorized persons
  
  (3) Every lender shall, for the purpose of an audit or examination under this Act, give all reasonable assistance to any person authorized by the Minister to carry out the audit or examination, provide access to all relevant sites, answer, orally or in writing, as required, all questions relating to the subject-matter of the audit or examination and provide all information and documentation in their possession and all copies required for the purpose of the audit or examination. Without the permission of the lender, the authorized person shall not remove the documentation or copies from the relevant sites. 
  
  ### Report of audit
  
  (4) The Minister shall provide the lender with a copy of the report of the audit or examination within twenty-one days after the report is completed. 
  
  ### Non-compliance
  
  (5) If a lender refuses or intentionally fails to comply with any requirement of this section, the Minister may notify the lender in writing that the Minister is not liable under this Act to make any payment to the lender in respect of any loss sustained by it as a result of any loan made by it. 
  
  ## Offences and Punishment 
  
  ### Offence
  
  16 (1) Every person commits an offence who, in respect of a loan, 
  (a) knowingly makes any false statement or misrepresentation in an application, report or other document or wilfully furnishes any false or misleading information; 
  (b) being a borrower, without the consent of the lender and with fraudulent intent, disposes of any assets taken as security for the loan where the disposition is not permitted by the regulations; or 
  (c) being a borrower, uses the proceeds of the loan, with fraudulent intent, for a purpose that does not fall within the scope of any prescribed class of loans. 
  
  ### Punishment
  
  (2) Every person who commits an offence under subsection (1) 
  (a) is guilty of an indictable offence and liable to a fine not exceeding $500,000 or to imprisonment for a term not exceeding five years, or to both; or 
  (b) is guilty of an offence punishable on summary conviction and liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding six months, or to both. 
  
  ### Limitation period
  
  (3) Any proceedings by way of summary conviction in respect of an offence under subsection (1) may be instituted at any time within but not later than three years after the time when the subject-matter of the proceedings arose. 
  
  ## General 
  
  ### Payment out of C.R.F.
  
  17 Any amount payable by the Minister to a lender under this Act is to be paid out of the Consolidated Revenue Fund. 
  
  ### Annual report
  
  18 The Minister shall, within twelve months after the end of each fiscal year, cause a report on the administration of this Act during the preceding fiscal year to be made. 
  
  ### Five-year review
  
  19 The Minister shall, within twelve months after March 31, 2004 and every five years after that, cause a comprehensive review and report of the provisions and operation of this Act during the preceding five years to be made. 
  
  ### Laying of reports before Parliament
  
  20 The Minister shall cause a copy of each report referred to in sections 18 and 19 to be laid before each House of Parliament on any of the first fifteen days on which that House is sitting after the day on which the report is made. 
  
  ## Consequential Amendment 
  21 [Amendment] 
  
  ## Repeal 
  22  [Repeal] 