Canada Small Business Financing Act: Capital Leasing Pilot Project Summative Review Report

Appendix A: Capital Leasing Pilot Project Parameters

The CSBF Program and CLPP operate according to the following major parameters.

Parameters	Loans	Capital Leases
Assets financed	Loans are restricted to financing: (1) equipment; (2) real property or immovables; (3) leasehold improvements; and (4) program registration fees.	Leases are restricted to financing: (1) new equipment, or used equipment that has a remaining economic life greater than the term of the lease; and (2) program registration fees.
Percentage of asset cost accepted for financing	The maximum amount of financing available under the loans component is 90 percent of the eligible cost of the assets.	The maximum amount of financing available under the pilot project is 100 percent of the cost of the equipment.
Fees	A one-time, up-front fee of 2 percent of the amount financed is paid at the time of registration. This fee can be included in the CSBF loan/lease. In addition, the lender/lessor is charged an administration fee of 1.25 percent (paid quarterly) on outstanding loan/lease amounts. Lenders/lessors may pass this fee on to borrowers/lessees only as part of the interest rate charged on their loans/leases.
Maximum interest rate	The maximum floating rate is the lender’s prime rate plus 3 percent (including the 1.25 percent administration fee). The maximum fixed rate is the lender’s residential mortgage rate plus 3 percent (including the 1.25 percent administration fee).	Lessors may not charge interest in excess of the Government of Canada Bond rate plus 13.25 percent (including the 1.25 percent administration fee).
Maximum financing amount	A borrower/lessee cannot have more than $250 000 in total loans and leases outstanding under the CSBF Program and the Small Business Loans Program.
Length of term	The maximum term for any loan is 10 years from the date the first principal payment is scheduled to be made.	The maximum term for any lease is 10 years from the date the lease was entered into.
Loss-sharing ratio	The Government of Canada shares in eligible losses after realizations on security. The Government of Canada’s share of eligible losses for loans/leases in default is 85 percent. Lenders/lessors are responsible for the remaining 15 percent.
Cap on claims	Each lender/lessor has a separate account for loans/leases made under the program. The Government of Canada’s obligation to an individual lender/lessor is to pay eligible claims (i.e. 85 percent of the eligible losses) on defaulted loans/leases in its account, up to a maximum of the aggregate of 90 percent of the first $250 000 in loans/leases registered, 50 percent of the next $250 000 and 10 percent of all loans/leases in excess of $500 000.