Presentation: Realizing on a Loan

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Presentation: Realizing on a Loan

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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.

Realization process

Quick facts

  • 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.

Reference tools

  • 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:
    • Fax: 1-343-291-1837
    • Address: 235 Queen Street, Ottawa, Ontario K1A 0H5