Presentation: Realizing on a Loan
400 KB , 9 pages
- Default on loan
- Notice process and timeline
- Realization process
- Quick facts
- Claim submission process
- Reference tools
Default on loan
- Default occurs when a borrower fails to comply with a material condition of the loan agreement.
- Material conditions can include borrower's failure to:
- Make principal and/or interest payments;
- Maintain ownership of the secured assets;
- Maintain insurance; or
- Pay property taxes.
- A minor failure (i.e. late filing of yearly statements) is not considered material.
- If payments are current but borrower is in default of a material condition, lenders may follow their normal lending practice and take action.
Notice process and timeline
- The lender may send a Notice of DefaultFootnote 1 demanding the borrower comply with the conditions set out in the notice within a specified time period.
- The lender shall issue a Demand for repaymentFootnote 1 if the borrower fails to comply with the Notice of Default.
- Time limit for submitting a claim for loss is 60 monthsFootnote 2 and begins after the day on which the borrower made the last payment (principal or interest) on a loan under the terms of the loan agreement.
- If required, a Request for Extension of claim submission date can be submitted.
- Lender must take all necessary measures:
- to minimize the loss;
- to realize on 100% of the assets of the business;
- to realize up to 100% of the corporate guarantee; and
- for personal unsecured guarantees and personal liabilities, the amount of the guarantees or suretyships signed by the guarantor.
- The lender shall provide documentation substantiating the sale price of the assets. If realization < costs, abandon the assets and provide documentation supporting the decision.
- The lender may negotiate a compromise settlement in order to reduce legal costs.
- If necessary, the lender shall explain the sharing of the realization proceeds attributable to the CSBF loan.
- Minister's liability is limited to up to 85% of lender's eligible losses.
- Claims may be adjusted or disallowed due to:
- Lacking evidence of purchase or proof of payment;
- Failure to provide a proper appraisal;
- Failure to take or maintain a valid and enforceable security; or
- Sharing of realization cost.
- Non compliance remedies: payment of a claim is permitted in certain situations, provided that the non-compliance is remedied as stipulated in the Regulations.
- Once a claim is final, the Minister is subrogated to all the rights of the lenders up to the amount paid.
Claim submission process
- Lenders must submit to Innovation, Science and Economic Development Canada a properly completed Claim for Loss Form.
- Types of Claims include:
- Regular claim for loss – after realization on all security, guarantees or suretyship is complete;
- Interim claim for loss – when realization on security is complete but before implementation of compromise settlement or full realization on guarantees and suretyship is complete;
- Additional claim – can be presented for a period of 12 months following the time limit for submitting a claim for loss; and
- Appeal claim – Lender provide additional information and requests that the Directorate review its decision.
- When submitting a claim, the lender may refer to the checklist of required documents.
- Toolbox for Lenders
- Each financial institution has its own designated Senior Program Delivery Officer who can be contacted at:
- Toll-free: 1-866-959-1699
- Email: firstname.lastname@example.org
- Fax: 1-343-291-1837
- Address: 235 Queen Street, Ottawa, Ontario K1A 0H5