Only in specific circumstances — and when the asset being financed had already secured a conventional loan from the same lender, the appraiser must be independent of the lender as well as the borrower.
Short answer
Most CSBFP files never trigger a formal appraisal requirement. Section 9(1) requires one only where the loan finances assets bought from a non-arm’s-length party, all or substantially all of a going concern’s assets, or — the narrowest and most missed trigger — “assets from the lender or its representative that, at the time of purchase, are being or had been used to secure a conventional loan of the lender.”
An in-house appraiser is ordinarily fine: they are a stranger to the borrower, which satisfies the usual arm’s-length requirement. But for that one paragraph-(c) trigger, s.9(1) requires an appraiser “who is a member of any professional association that is recognized under a federal or provincial law and who is at arm’s length from the borrower, and, in the case of assets described in paragraph (c), from the lender.” Subsection (2) restates the same dual test for the asset classes most business-purchase loans actually finance: “the appraisal must be made by an appraiser who is at arm’s length from the borrower and, in the case of equipment or leasehold improvements that are assets referred to in paragraph (1)(c), the lender.” A lender’s own staff appraiser is, by definition, not at arm’s length from the lender. Where the loan finances equipment the seller had already pledged to the same bank now lending to the buyer, that in-house appraisal does not satisfy the Regulations regardless of the number it produces, and s.9(4) then bases the eligible loan on the lesser of cost and the (properly obtained) appraised value.
the appraiser had to be independent of the lender too is the direct example: equipment already secured a conventional loan from the same bank, an independent third-party valuation came in $25,000 below the bank’s own informal estimate, and the eligible loan shrank accordingly.
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