Quick Answer
Secured lending in Ontario runs through six stages: the loan application, agreeing on a term sheet, registering security under the PPSA, satisfying conditions precedent, closing and funding, and ongoing compliance once the loan is in place. A general security agreement, guarantees, and priority agreements between lenders are the documents that come up in almost every deal, regardless of loan size.
The Lending Process
1
Application
2
Term sheet
3
Security registration
4
Conditions precedent
5
Closing
6
Ongoing compliance
The Complete Guide
Security
PPSA Security
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Security
General Security Agreement
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Protection
Personal & Corporate Guarantees
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Real property
Mortgages
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Priority
Priority Agreements
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Security
Share Pledges
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Diligence
Security Reviews
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Closing
Conditions Precedent
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Closing
Closing Mechanics
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Default
Enforcement
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Frequently Asked Questions
What is a general security agreement and do I need one?
A general security agreement gives your lender a claim over all, or substantially all, of your company's assets if you default. Almost every commercial lender asks for one, whether you're borrowing $50,000 or $5 million. If you're taking on secured debt, expect to sign one.
What does registering a PPSA security interest actually do?
Registering under the Personal Property Security Act puts the world on notice that a lender has a claim on specific assets, and it locks in that lender's priority against anyone who registers later. Miss the registration, or get it wrong, and a lender's security can end up unenforceable or behind another creditor's.
Why would a lender require a personal guarantee?
Lenders ask for a personal guarantee when the corporation's assets alone don't give them enough comfort, which is most of the time for small and mid-sized businesses. It puts your personal assets behind the loan, and it's usually the first thing worth negotiating before you sign a term sheet.
What are conditions precedent and why do they hold up closing?
Conditions precedent are the items a borrower has to deliver before a lender will fund, things like corporate documents, insurance certificates, and confirmed security registrations. Closing doesn't happen until every condition is satisfied or waived, so the borrowers who close fastest are the ones who start gathering these on day one.
What happens if I default on a secured loan?
Default triggers the lender's enforcement rights under the security agreement and the PPSA, which can include seizing assets, appointing a receiver, or calling the loan in full. What actually happens depends on the loan documents and how quickly the borrower and lender talk once a default occurs.
How long does it take to close a secured loan?
A straightforward secured loan can close in two to four weeks once the term sheet is signed. Complex deals with multiple security interests, real property, or more than one lender in the mix take longer, mostly because of the diligence and registration work behind the scenes.
What's the difference between a mortgage and a general security agreement?
A mortgage secures a loan against a specific piece of real property and gets registered on title. A general security agreement secures a loan against a company's other assets, like equipment, inventory, and receivables, and gets registered under the PPSA. Most secured loans that touch real estate use both.
Can more than one lender hold security over the same assets?
Yes, and it happens often. When more than one lender has security over the same assets, their priority is set by registration timing under the PPSA unless they agree otherwise in a priority agreement.
What is a priority agreement and when do I need one?
A priority agreement is a contract between two or more lenders that sets out who gets paid first if the borrower defaults, regardless of what the PPSA registration order would otherwise say. You need one whenever a new lender is coming in behind an existing one, or when a landlord or supplier also holds security.
Do I need a lawyer to review loan documents before I sign?
You should. Loan documents are drafted by the lender's counsel to protect the lender, and the terms, covenants, and default provisions are all negotiable before signing, not after. A short review upfront is far cheaper than trying to renegotiate once you're in default.