Bulletin – July 2006

What'S New at CSBFP

A new feature, What's New at CSBFP, has been added to our website to inform lenders about recently published Bulletins, publications and other matters concerning the Canada Small Business Financing Program.

Calculation of the Eligible Amount of the Loan

In the May 2000 Bulletin, we outlined the calculation of the eligible cost of the assets purchased by the borrower and the eligible amount of the loan. It has been brought to our attention that the content of that Bulletin is somewhat confusing and difficult to understand. In order to simplify this subject, we have replaced that Bulletin with the explanation below.

For each loan class (equipment, real property, leasehold improvements), the eligible cost and proof of payment are calculated as follows in order to determine the eligible amount of the loan:

Step 1 – Eligible cost of assets purchased

The eligible cost represents 90% of the total amount (less refundable taxes) in the invoice/purchase contract and for which there is proof of payment. Any invoice/purchase without proof of payment is excluded.

Note: For those loans that require an appraisal, the eligible cost is the lesser of the cost of the eligible assets in the invoice/purchase contract (less refundable taxes) and the appraised value of the eligible assets.

For more information on appraisals, please refer to the April 2005 Bulletin.

Step 2 – Eligible proof of payment

The eligible proof of payment is the lesser of:

• the amount of the payment that equals the amount of the invoice/purchase contract (less refundable taxes), and
• the amount of the payment if it is less than the amount of the invoice/purchase contract (less refundable taxes) .

Step 3 – Eligible amount of the loan

The eligible amount of the loan is the lesser of:

• Step 1: the eligible cost of assets purchased, and
• Step 2: the eligible proof of payment

The example in the table on page 2 illustrates these calculations.

Class of loan	Amount of the cost of asset purchased less refundable taxes	Proof of payment	Step 1 Eligible cost of asset purchased (90% of cost less refundable taxes)	Step 2 Eligible proof of payment	Step 3 Lesser of Step 1 and 2 Eligible amount of loan
Equipment	$1,080.00	$1,150.00	$972.00	$1,080.00	$972.00
Equipment	$3,240.00	$2,000.00	$2,916.00	$2,000.00	$2,000.00
Equipment	$540.00	$ 0.00	$ 0.00	$0.00	$0.00
Equipment	$2,630.00	$2,630.00	$2,367.00	$2,630.00	$2,367.00
Total Eligible Equipment	$7,490.00	$5,780.00	$6,255.00	$5,710.00	$5,339.00
Leasehold Improvements	$1,620.00	$3,000.00	$1,458.00	$1,620.00	$1,458.00
Leasehold Improvements	$0.00	$1,000.00	$0.00	$0.00	$0.00
Leasehold Improvements	$5,000.00	$4,600.00	$4,500.00	$4,600.00	$4,500.00
Total Eligible Leasehold Improvements	$6,620.00	$8,600.00	$5,958.00	$6,220.00	$5,958.00
Eligible amount of loan					$11,297.00

Please visit our website's Contact page to submit your comments or feedback on this subject. We encourage you to submit any topic of interest that you would like to see addressed in future Bulletins.