Bulletin – April 2006

Application of the 180-Day Rule

Par. 6(a) CSBF Regulations , Item 5.1, Section A of the revised CSBFP Guidelines

The 180-day rule has been a frequent subject of eligibility rulings. It has also been a cause of adjustments and rejections of CSBF claims. This Bulletin outlines certain scenarios on how this rule is interpreted. A table illustrating these scenarios is provided on page 2.

The 180-day rule in general

The cost of a project may include expenditures (payments) or commitments made within 180 days prior to the date of loan approval (paragraph 6(a)) of the CSBF regulations. Therefore, as long as the payment or the commitment for the asset was made within this 180-day period, the amount of that commitment or payment is eligible for financing.

In order for the loan to be eligible, the date of an irrevocable commitment or a non-refundable payment must fall within the 180-day time frame.

Calculating the 180 days in conditional/unconditional offers

Where the borrower has entered into a conditional offer, the 180 days cover the period from the date of loan approval to the date when all the conditions of the offer are fulfilled, the deposit becomes non-refundable and the contract becomes binding. In the case of an unconditional offer with a non-refundable deposit, the 180 days cover the period from the date of loan approval to the date the payment or the date of the contract, whichever is the latest.

Calculation of the 180-day rule where the payment is made before the date of the invoice/contract

A payment is in itself a commitment. If a non-refundable amount is paid, the 180 days cover the period from the date of loan approval to the date of the payment and not to the date of the invoice/contract. The commitment cannot occur at a later date, since the payment confirms the commitment when the payment is made.

An invoice is not in itself proof of the date upon which the commitment and/or expenditure is made. In fact, it is only one element of proof among many that permits the determination of the date of the expenditure and/or commitment.

Where partial payment of the asset may be eligible

The payment of a non-refundable deposit more than 180 days before the loan is approved does not render the entire purchase ineligible. For example, in the case of an asset purchased for $100 000, the non-refundable deposit of $20 000 made more than 180 days prior to the date of loan approval is not eligible; however, the payment of the balance of $80 000, if made within the 180-day timeframe, would be considered eligible.

The table on page 2 illustrates how various scenarios of payments and commitments are treated in determining the eligibility of the amounts.

Table

	Transaction Prior to 180 days from date of loan approval	Transaction Within 180 days from date of loan approval	Eligible Amount
1	Invoice and expenditure $100 000		NIL
2		Invoice and expenditure $100 000	$100 000
3	Invoice $100 000	Expenditure $100 000	$100000
4	Expenditure $100 000	Invoice $100 000	NIL
5	Invoice $100 000 Expenditure $20 000	Expenditure $80 000	$80 000
6	Expenditure $20 000	Invoice $100 000 Expenditure $80 000	$80 000
7	Conditional contract (invoice) $100 000 Expenditure (deposit) $20 000	Expenditure $80 000 Conditions waived on contract (invoice)	$100 000
8	Conditional contract (invoice) $100 000 Expenditure (deposit) $20 000 Conditions waived on contract (invoice)	Expenditure $80 000	$80 000

If you have any comments on the points raised by this topic, please feel free to contact us. We encourage you to submit any topics of interest that you would like to see addressed in future bulletins.