Ministerial Loan Guarantee toolkit for lending institutions
The lender should refer to the Ministerial Loan Guarantee Manual for the complete terms and conditions. This toolkit explains a lender's responsibilities.
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The lender's responsibilities
An approved Ministerial Loan Guarantee (MLG) must be in place for the lender to authorize a project. The applicant is responsible for all costs associated with work undertaken prior to receiving an MLG approval.
Lender responsibilities include:
- following prudent lending practices
- entering into a Guarantee Agreement with the Minister of Indigenous Services Canada
- completing and submitting to Indigenous Services Canada the Guaranteed Loans Terms & Conditions Report within 60 days of an MLG approval
- completing and submitting the Annual Lender Confirmation of Actuals Report, as requested
- monitoring arrears and loan default with due diligence, negotiating alternative arrangements with the borrower where possible to avoid requesting payment under the Guarantee Agreement
- negotiating alternative financial arrangements with the borrower in case of default
- within 90 days of a loan being in default, informing the borrower, First Nation, and Indigenous Services Canada of the default via the Notification of Loan Default
How to transfer to another branch or between lenders
If a borrower wishes to transfer the loan to another branch or lender, the Loan Agreement and the Guarantee Agreement must be transferred by the previous branch or lender. The lender has to:
- inform Indigenous Services Canada of the transfer in writing and provide the new lender or branch and the department with the updated Guaranteed Loan Terms and Conditions Report
- inform the regional officer responsible of the transfer in writing
- provide the new lender or branch and Indigenous Services Canada a copy of the Guarantee Agreement
Once the loan has been transferred, the previous branch or lender has to notify Indigenous Services Canada of the transfer. The previous lender does not provide a Paid in Full notice.
The new branch or lender has to provide the Guaranteed Loan Terms and Conditions Report to Indigenous Services Canada within 60 days of receiving the loan so that the transfer can be registered in the Grants and Contribution Information Management System. The Guaranteed Loan Terms and Conditions Report must include:
- name and address of the new branch or lender
- guarantee certificate number (ensures that Indigenous Services Canada’s database is kept up to date)
- term start and end date
- interest rate
- outstanding principal balance of the loan (does not change in the transfer)
- total amortization period of the loan (does not change in the transfer)
- written agreement that the new branch or lender assumes the obligations under the Loan Agreement and the Guarantee Agreement
- instalment frequency and amount
- interest type
- date of first instalment
- lender loan number
Borrower's arrears (debts) and defaulting
Arrears (debts)
If a borrower fails to make loan payments under the Loan Agreement:
- The lender has to inform the borrower, the First Nation, and Indigenous Services Canada of the arrears (debts).
- Within 90 days of default, the lender submits a first Notification of Loan Default and every 30 days thereafter while the default continues (up to 120 days from the date on which the lender gave the initial Notification of Loan Default). The lender must send the Notification of Loan Default to the borrower, the First Nation, and Indigenous Services Canada. Failure to provide notification as per this schedule requires the notification process to start over.
- The lender shall monitor the situation with due diligence and, if possible, negotiate alternative arrangements with the borrower to avoid requesting payment under the Guarantee Agreement.
- The department may make loan payments (including arrears) to the lender as a last resort.
Default
If a borrower has defaulted on their loan, the lender must complete the Notification of Loan Default form.
Where the loan remains in default for 120 days from the date on which the lender gave the initial Notification of Loan Default, the lender must submit to the department the Claim to Indigenous Services Canada for Payment for the unpaid balance of principal and accrued interest at the contract rate up to the date the claim is paid. The Claim to Indigenous Services Canada for Payment shall be submitted along with supporting documentation, confirming that the loan is in default and the unpaid balance of principal and accrued interest, plus other reasonable costs, are specified and included in the amount set out in the claim and are due under the Guarantee Agreement’s terms. The maximum period of accrued interest being paid shall not exceed 270 days unless agreed to, in advance and in writing, between the lender and the department.
Schedule of Reporting
Guaranteed Loan Term and Condition Report
After an MLG has been approved, the lender has 60 days to submit a completed Guaranteed Loans Terms and Conditions Report to their regional office.
Within 60 days of the loan being refinanced, renewed or assigned, the lender must submit a completed Guaranteed Loans Terms and Conditions Report to the borrower, First Nation, and Indigenous Services Canada.
Within 60 days of the transfer or assignment of an existing loan, the existing lender or branch shall provide the new lender or branch with a copy of the Guarantee Agreement, including the Guarantee Certificate number.
Within 60 days of receipt of the transferred or assigned loan, the new lender or branch forwards a completed Guaranteed Loans Terms and Conditions Report form to Indigenous Services Canada. The new lender or branch also sends a letter certifying that they assume the obligations of the loan and Guarantee Agreement.
Lender Confirmation of Actuals Report
The Annual Lender Confirmation of Actuals Report is a way for Indigenous Services Canada to reconcile the data from the internal Guaranteed Loan Management system to the actual numbers, at the end of each fiscal year (March 31st). The regional officer responsible for MLGs sends out a call letter (Annual Lender Confirmation of Actuals Report) to each lender at the end of the fiscal year. Each lender must complete the Annual Lender Confirmation of Actuals Report summarizing the yearly status of each MLG by March 31st and submit it to the regional officer responsible for MLGs by the set date.
Notification of Loan Default:
- After 90 days of default, the lender can submit a first Notification of Loan Default and every 30 days thereafter while the default continues (up to 120 days from the date on which the lender gave the initial Notification of Loan Default). Failure to provide notification as per this schedule requires the notification process to start over.
- Every 30 days thereafter that the loan remains in arrears, the lender sends a Notification of Loan Default to the borrower, the First Nation, and Indigenous Services Canada. The lender shall submit a Claim to the department for payment form after 120 days.