Email to Mr. Harvey Wong, Director, Canada Small Business Financing Program, CSBFP

Since September 2004, I have been trying to get those copies of those most basic documents from CIBC in vain. How can any CSBFA loan be secured when the leasehold or asset invoices and subsequent payments are undocumented or inadequately documented?

Also, I understand that the due diligence requirements for the Borrower's estimated annual gross revenue (Box 9, CSBFA Loan Registration Form) needs to have a reasonable basis and that needs to be also documented. I have concluded that the $473,506 is a fiction, which was created to "pass" a ratio spreadsheet for the letting of CSDFA loans.

Email to Mr. Harvey Wong, Director, Canada Small Business Financing Program, CSBFP

To: Mr. Harvey Wong, Director, Canada Small Business Financing Program
From: Mr. Andrei Oudovikine
Date: March 30, 2005

Thank you for you letter dated March 18, 2005.

I would appreciate if you might tell me the by which an Audit or Examination as defined in CSBFA s.15 of my $100,000 and $129,000 loans might be conducted.

Under the heading 10. CHECKLIST at your website, the 10th and 11th items are:
• evidence is on file to support the cost of assets financed (i.e. invoices, contracts, purchase and sale agreements, etc.) (see Item 5.1); and
• evidence is on file to support that the assets financed by the loan were paid by the borrower (i.e. cancelled cheques, credit card receipts, vendor's receipted invoice, or vendor's declaration) (see Item 5.1); (see http://strategis.ic.gc.ca/epic/internet/incsbfp-pfpec.nsf/en/la00074e.html#A8)

Since September 2004, I have been trying to get those copies of those most basic documents from CIBC in vain. How can any CSBFA loan be secured when the leasehold or asset invoices and subsequent payments are undocumented or inadequately documented?

Also, I understand that the due diligence requirements for the Borrower's estimated annual gross revenue (Box 9, CSBFA Loan Registration Form) needs to have a reasonable basis and that needs to be also documented. I have concluded that the $473,506 is a fiction, which was created to "pass" a ratio spreadsheet for the letting of CSDFA loans.

In summary,
1. What is the process for an audit?
2. Where are any documents supporting any CSBFA loan (justifying cost and payment)
3. What justification is there for Box 9?

Sincerely,

Mr. Andrei Oudovikine
416-219-6576 Tel


Canada Small Business Financing Act, s. 15

13. AUDIT OR EXAMINATION
The CSBFA permits an audit or examination of the lender's documents, records and books of account relating to any CSBF loan. The Administration must give a 21 day notice in writing prior to any such audit or examination.

Lenders shall provide all reasonable assistance as well as the documents, records and books of account and shall cooperate fully in the audit or examination. Any refusal by lenders may result in the Minister not being liable for payment of any loss sustained by that lender.

Once the report of the audit or examination is completed, a copy is to be provided to the lender within 21 days.


Industry Canada Checklist

10. CHECKLIST
When assessing the eligibility of a loan, lenders may find the following checklist useful:
1. business is eligible (see Item 1);
2. borrower is eligible (see Item 2);
3. gross annual revenue of business is not or will not be greater than $5 million (see Item 1);
4. aggregate of the outstanding loans to the borrower and related borrowers is not greater than $250,000 (including outstanding loans guaranteed under the Small Business Loans Act) (see Item 3);
5. assets financed fall within the prescribed classes (see Item 4);
6. percentage of assets financed does not exceed 90% of the eligible cost of the assets (see Item 5.1);
7. date of purchase or commitment to purchase the assets is within 180 days before the day the loan is approved (see Item 5.1);
8. expenditures or commitments were not previously financed by the borrower on a term loan (see Item 5.2);
9. appraisals have been made and received, where applicable (see Item 5.3);
10. evidence is on file to support the cost of assets financed (i.e. invoices, contracts, purchase and sale agreements, etc.) (see Item 5.1);
11. evidence is on file to support that the assets financed by the loan were paid by the borrower (i.e. cancelled cheques, credit card receipts, vendor's receipted invoice, or vendor's declaration) (see Item 5.1);

12. term of loan is not greater than 10 years (see Item 6.1);
13. first scheduled principal repayment is within one year of the date the loan is made (see Item 6.1);
14. rate of interest does not exceed 3% above the prime rate or the residential mortgage rate (see Item 6.2);
15. no fees, service charge, or charge of any kind is payable to the lender by the borrower, other than the registration fee or other prescribed fees or charges (see Item 6.3);
16. insurance is held over the assets given as security;
17. required security has been/will be taken (see Item 7.2, 7.3 and 7.4);
18. unsecured personal guarantees or suretyships, in aggregate, do not exceed 25% of the amount of the loan disbursed. This limit does not apply to corporate guarantees or suretyships (see Item 7.4).


Canada Small Business Financing Regulations, s. 8

8. DUE DILIGENCE
Lenders are expected to apply the same care and procedures in making a CSBF loan as they would for their conventional loans of similar amounts. Such procedures would include but would not be limited to:
• conducting a credit check on the borrower, or
• obtaining credit references, and
• completing an assessment of the repayment ability of the borrower.

In addition, due diligence must continue throughout the administration and collection of the CSBF loan. Special care should be used when releasing or substituting assets taken as security, guarantees or suretyships. Lenders are reminded of their responsibilities to minimize the loss.


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