Guidelines

Section D: Annex, Forms and Glossary

Glossary

Annual

Periods of 365 or 366 days fixed by calendar dates (e.g. July 5, 2008 to July 4, 2009). Regs par.10(2)(b)

Borrower

A person who carries on or is about to carry on a small business to whom a loan has been made under the Canada Small Business Financing Act or the Small Business Loans Act. The business can be a sole proprietorship, partnership, or corporation. Regs ss.1(1)

Business carried on in Canada

A business with a place of business in Canada and assets for operating the business held in Canada. Act s.2

Cancelled cheque

A cheque that has been negotiated or cleared by the borrower and a vendor's financial institution.

Conventional loan

A loan that is not subject to the CSBFA or SBLA. Regs ss.1(1)

Corporate guarantee

In Common Law, a pledge given by a corporation, other than the borrower, to repay part or all of a borrower's debt in case of default (Equivalent to "corporate suretyship" in the Civil Code of Quebec.). Regs s.20

CSBFA

Canada Small Business Financing Act (Act)

CSBFP Directorate

The Canada Small Business Financing Program Directorate, the branch of Industry Canada responsible for administering CSBF loans and SBLA loans.

CSBFR

Canada Small Business Financing Regulations (Regulations)

Default

A borrower's failure to comply with a material condition of the CSBF loan agreement, including any amendments to the loan agreement, a deed of hypothec, or any other document signed by the borrower and the lender. Such a condition must be material to the loan such that it would affect the collection of the loan Regs s.36

Eligible cost

Amount indicated on a paid invoice or purchase contract, less any directly related refundable taxes, grants or discounts.

Eligible loan amount

Sum of the registration fee, if financed, plus the lesser of 90% of the eligible costs and 100% of the eligible proof of payment.

Equipment

Equipment used or to be used in the course of carrying on the small business, and includes computer software, any ship, boat, or other vessel used or to be used in navigation and water supply systems. It does not include inventory of the small business except inventory that is leased by the borrower to the borrower's customers. Regs ss.1(1)

Farming

A business classified under Major Group 01 – Agricultural Industries, of the Standard Industrial Classification, 1980, published by Statistics Canada. If more than 50% of the business' gross annual revenues are from farming, it is ineligible for CSBFA financing.

General Security Agreement

A charge on all the assets of a business, including assets acquired after the agreement is made. Also called a GSA. Universal Movable Hypothec under the Civil Code of Quebec.

Going concern

A business that has carried on operations at any time within 60 days prior to being purchased. If a seasonal business, one that operated during the season prior to purchase. Regs ss.1(1)

Guarantee

In Common Law, a pledge given by one legal entity to answer for the all or part of the debt of the borrower. (Suretyship in the Civil Code of Quebec) Regs s.19 & s. 20

Health care industry

A business enterprise classified under the Major Group 86 – Health and Social Service Industries of the Standard Industrial Classification, 1980, published by Statistics Canada. Regs ss.1(1)

Holdback

The amount retained from an interim claim payment. For CSBF claims, the Minister holds back its 85% share of any unrealized outstanding liability of the borrower or guarantor(s).

Hospitality industry

A business enterprise classified under the headings:
Major Group 91– Accommodation Service Industries or
Major Group 92– Food and Beverage Service Industries.
of the Standard Industrial Classification, 1980, published by Statistics Canada. Regs ss.1(1)

Improvement

Includes construction, renovation and modernization, and, with respect to equipment, installation. Regs ss.1(1)

Independent Small Businesses

The business enterprises carried on by related borrowers:
that are operating separate small businesses at different premises; and
where neither business derives more than 25% of its actual or projected gross revenues from the other. Regs ss.3(6)

Instalment

One of a series of payments required to pay off a CSBF loan. At least one principal payment must be scheduled annually and the first principal payment must be scheduled no later than one year from the date of the first disbursement of the loan funds. Regs par. 10(2)(b)

Interim Claim

A claim for loss that is submitted once realization is complete on all business assets but before realization on the borrower's and any guarantors' liability has been finalized. Regs s.39.

Lending Period

One of a series of 5-year periods in which the Minister of Industry Canada has a liability to pay claims for eligible losses to lenders under the CSBFA. Act ss.6(1) or under SBLA
Period C3: April 1, 2009 to March 31, 2014
Period C2: April 1, 2004 to March 31, 2009
Period C1: April 1, 1999 to March 31, 2004
Period 12: April 1, 1993 to March 31, 1999

Loan

A loan that meets the conditions regarding the eligibility of the lender, borrower and small business. The loan must also be made for expenditure or a commitment that falls within the scope of one or more of the prescribed classes of loan and the cost of these expenditures or commitment must not exceed the prescribed limits. Act s.2

Loan term

Period set out in a loan agreement for repayment of the total amount of the loan. Regs ss.1(1)

Loss sharing ratio

The relative percentages of loss for which the minister and lender are responsible. The current loss sharing ratio is 85/15. Act s.8

Minister

The Minister of Industry is designated as the Minister for the purpose of this Act. Act s.2

Mini-storage industry

A business enterprise classified under the heading 479 – Other Storage and Warehousing Industries of the Standard Industrial Classification, 1980, published by Statistics Canada. Regs ss.1(1)

Non-arm's length transaction

Transaction made between related parties as described in section 251 of the Income Tax Act which defines related persons as individuals connected by blood relationship, marriage or adoption and any situation involving different degrees of control by these persons or corporations. Control is not defined by a specific percentage and can be a question of facts, even between two non-related parties. Regs ss.1(2)

Personal Guarantee

In Common Law, a pledge given by an individual person to answer for the all or part of the debt of the borrower. ("Suretyship" in the Civil Code of Quebec). Regs s.19

Program liability ceiling

Maximum amount of the Minister's aggregate contingent liability in respect to the aggregate principal of loans made by all lenders for a 5-year lending period. The liability ceiling is currently $1.5 billion. Act s.6

Proof of payment

Evidence of payment of the documents constituting the proof of purchase used to calculate the eligible cost. Examples include cancelled cheques, debit card or credit cards transactions, attestation and formally executed sales contracts.

Proof of purchase

Documentation supporting expenditures that are the subject of financing under the program. Examples are deeds of sale, invoices, and purchase agreements.

Related Borrowers

Two or more borrowers are deemed to be related where one borrower:

• controls, directly or indirectly, the other borrower;
• is controlled, directly or indirectly, by the same person or group of persons as the other borrower
• carries on a small business in partnership with the other borrower;
• shares administration/management services, equipment, facilities, or overhead expenses with the other borrower but not in partnership with the borrower. In this case, the two businesses are deemed to be one small business entity and are, collectively, eligible for a maximum loan of $500,000 (of which a maximum of $350,000 can be used to finance the purchase or improvement of equipment and the purchase of leasehold improvements). If two or more borrowers are related, they are, between them, only eligible to obtain a maximum loan amount of $500,000 (of which a maximum of $350,000 can be used to finance the purchase or improvement of equipment and the purchase of leasehold improvements). Regs ss.3(2)

SBLA

Small Business Loans Act, predecessor to the CSBFA.

Small business

A business being carried on in Canada for gain or profit, with estimated gross annual revenue of not more than $5 million. It does not include the business of farming or a business having as its principal object, the furtherance of a charitable or religious purpose. Act s.2

Substantially all

In analyzing a specific transaction to assess whether the sale involves "substantially all" of the assets of a going concern, lenders should consider the percentage of total assets being sold, whether the transaction would fundamentally change the nature of the business, and whether the vendor can continue its normal business activities without the assets that are being sold. Regs par.9(1)(b)

Surety

Civil Code of Quebec terminology for the person, other than the borrower, that makes a pledge to pay part or all of the borrower's debt if the borrower defaults on its loan. (Equivalent to "guarantor" in Common Law) Regs s.19 & s. 20

Suretyship

Civil Code of Quebec terminology for the pledge given by someone to answer for all or part of the debt of another. (Equivalent to "guarantee" in Common Law.) Regs s.19 & s. 20

Universal Movable Hypothec

Civil Code of Quebec term for a General Security Agreement.