Loans FAQ

An investment loan is a loan that is used to purchase mutual or segregated funds. The purchased funds are held as collateral which secures the loan, much the same way as a house is used as security for a mortgage loan. With an investment loan, the lender holds the funds on behalf of the borrower until such time as the loan is repaid in full.

Generally, the ideal loan candidate has a higher risk tolerance combined with an appetite to increase their exposure to the market. They should have a good credit history, their debt levels under control and be committed to a long-term investment strategy. Of course, the decision to apply for an investment loan is one that should be made by an investor after consulting with a financial advisor.

A leveraged purchase of mutual or segregated funds involves a greater degree of risk than a similar purchase using cash resources only. The reason for this is that if the value of the investment falls, the borrower suffers a loss of value beyond what they may have experienced had they invested with only their own money. 

For example, on a 2 For 1 Loan where investors pledge $50,000 and borrow another $100,000, if the investment drops in value by 10%, the numbers would look like this:

On the investors’ portion of the investment, $50,000 less 10% = $45,000, they’ve lost (so far) $5,000. Had they ONLY invested with their own money their loss would be fixed at $5,000. However, when you include the investment from borrowed funds, $100,000 less 10% = $90,000, an ADDITIONAL $10,000 is lost.

Borrowers are also responsible for loan payments irrespective of the performance of their investments. In other words, should an investment drop in value, not only does the borrower lose on the investment, but they are also still required to repay the loan in full.

There are 3 different loan products offered through our investment loan program: 100%, 2 For 1 and 1 For 1. Each comes with either a no margin call or lower priced margin call feature. Each loan product also offers a choice of monthly payment type: interest only or principal plus interest.

There are no annual or administration fees associated with our investment loan program. There is, however, a charge to register a segregated fund security interest under Personal Property Security Act (PPSA). This fee (currently $60) is charged on the first payment date. As well, B2B Trust charges $35 for any returned payments.

Because every individual’s situation is unique, we take a holistic approach to underwriting. Some of the key criteria we consider include:

• Total debt service ratio (TDSR): the applicant’s regularly recurring monthly debt payments (including the new loan payment) should be less than 40% of their gross monthly income.
• Net worth: the applicant’s tangible net worth is calculated by subtracting their total outstanding liabilities (debt obligations) from the total of their verifiable assets. This amount should be a minimum of 1 times the loan amount. For loans between $100,000 and $250,000, net worth should be 1.5 times the loan amount. For loans greater than $250,000, net worth should be 2 times the loan amount.
• Credit history: all obligations must be up-to-date and paid as agreed – no bankruptcies, collections or judgements.

Note that TDSR and net worth requirements are only applicable to 100% Investment Loans or to investment loans greater than $250,000.

To help determine whether your client is “credit worthy” consider:

• whether they have established a file at the credit bureau;
• if they regularly pay their bills on time;
• if they have money left over after meeting their monthly expenses.

A fillable B2B Trust loan application can be obtained by clicking here. Paper applications can be ordered by filling out our Material Request Form and faxing it to 416.865.5709. Please contact our distribution alliances directly for their program applications.

Yes, B2B Trust requires the following:

• Void cheque
• Letter of Direction (included with the loan application). This form is required only if paying out a loan at another financial institution
• Pledge Letter (included with the loan application) and/or cheque payable to B2B Trust. The Pledge Letter is required if paying out a loan at another financial institution, OR if your client is pledging collateral on a 2 For 1 or 1 For 1 loan
• Moveable Hypothec (Quebec only)

For distribution alliance mutual fund loans, also include:

• Letter of Privilege (included with the distribution alliance loan application)

For distribution alliance segregated fund loans, also include:

• Notice of Investments (included with the distribution alliance loan application) and/or cheque payable to B2B Trust. The Notice of Investments is required if paying out a loan at another financial institution, OR if your client is pledging collateral on a 2 For 1 or 1 For 1 loan
• Assignment, Acknowledgement and Direction (included with the distribution alliance loan application)
• Original application to the insurance company

For all 100% Investment Loans greater than $100,000 (or at our discretion):

• Proof of assets such as statements/assessments
• Proof of income details are as follows:
  Salaried income: pay stub or T4 and Notice of Assessment
  Commissioned income: last 2 years Notice of Assessment
  Self-employed income: last 2 years Notice of Assessment and Financial Statements

Absolutely. Completed investment loan applications and supporting documents can be faxed to B2B Trust at 1.866.941.7711. Please note, however, that if an investment loan is funded based on faxed information, the original loan documentation must be forwarded to B2B Trust within 10 days.¹ Should original documentation not be received within this allotted timeframe, funding may be reversed and units redeemed. Any deficiency resulting from the loan exceeding the redemption proceeds is to be paid by the applicant.

Be sure to forward all original completed, signed and witnessed loan documents to: B2B Trust, Loan Products Group, 130 Adelaide Street West, Suite 200, Toronto, Ontario M5H 3P5.¹

B2B Trust will fax approved/declined/delayed notification to your office within one business day of receipt of the application. Delays are usually the result of missing information or if further clarification is required. For declined loans, B2B Trust will follow up with a telephone call to ensure you fully understand the reasoning behind the decision.

Once approved, B2B Trust will fund the loan and place the mutual fund purchase orders within one business day.

B2B Trust currently lends on over 97% of mutual funds. We also regularly review the criteria that determine qualifying collateral for each of our loan types. Retail Venture Capital, Alternative Strategies and Miscellaneous do not qualify for any of our products. Please be aware that all funds must be valued in Canadian currency to be eligible.

Not at all. We try to accommodate all of your clients’ needs. As such, borrowers may select any day of the month – from the 1st to the 28th – whatever is most convenient for them. Flexible payment dates can be helpful to your clients when it comes to managing their monthly cash flows.

Absolutely and at any time. Borrowers can make lump sum payments whenever they choose at no additional charge or penalty. Should they wish to increase their monthly loan payment amount, written instructions directing us to increase their payment must be provided on B2B Trust’s Financial Account Changes form. Payment decrease requests are considered on a case-by-case basis.

There are typically no changes made to the loan payment amount during the year unless requested by the borrower. This is a real benefit for those managing their cash flow on a monthly basis. Interest only payments are adjusted annually (effective for the January payment), or more frequently, if required to maintain the payment at a level sufficient to cover accruing interest costs.

Here’s how it works: in May, a borrower is approved for a 100% Investment Loan in the amount of $50,000. The Prime rate in effect is 6.00%, and the monthly payment is $281.25 ($50,000 x 6.75% [6.00% + 0.75%] ÷ 12). The Prime rate then increases to 6.25% in September, the borrower’s payment remains at $281.25 for the duration of the year. At year end, the outstanding loan amount is $50,042.64 because the difference from the increased interest costs have accrued and have been added to the principal amount. Therefore as of January 1^st in the new year, the payment increases to $291.91($50,041.68 x 7.00% [6.25% + 0.75%] ÷ 12).²

You bet. To pay off a loan, the account holder can send a cheque payable to B2B Trust for the full amount outstanding, or direct us to redeem the security held as collateral for the loan. All loans can be paid out at any time without any additional charge or penalty from B2B Trust.

If the borrower pays the loan from their own resources, the collateral held as security by B2B Trust will be re-registered into the client’s name. If the borrower chooses to pay the loan by redeeming the funds held as security by B2B Trust, any surplus that remains after the trades have settled will be sent by cheque to the borrower. If there is a deficiency balance, it will be necessary that the borrower make arrangements to pay it in full.

Your client does not need to take any action when their account is in a margin warning position; notices are sent to alert you and your client that the loan-to-value ratio of the investment loan has risen and that if the trend continues, it may result in a margin call. When a margin warning is received, you can use it as an opportunity to discuss potential next steps with your client.

You will receive notification if your client’s loan reaches a margin call. At this point, your client must take action to reduce the loan-to-value ratio. They have a couple of options to remedy the situation: they may either provide B2B Trust with additional mutual fund collateral, or they can pay down the loan balance by sending a cheque payable to B2B Trust.

Certainly. B2B Trust is committed to keeping advisors and their clients informed of all account transactions. Year-end investment loan statements (including interest expense totals) are issued in mid-January. Clients with a 100% Investment Loan (interest only, no margin call) will receive loan statements on a quarterly basis as well.

B2B Trust’s RRSP Loan Program focuses on offering maximum value, choice and ease to help advisors meet more of their clients’ needs . . . more often.

A fillable B2B Trust loan application can be obtained by clicking here. Paper applications can be ordered by filling out our Material Request Form and faxing it to 416.865.5709. Please contact our distribution alliances directly for their program applications.

Yes, in all cases B2B Trust requires a void cheque from the borrower’s personal account from which to draw the loan payments. Other supporting documentation may include:

• Letter of Direction (included with the loan application). This form is required if paying out a loan at another financial institution.
• Pre-Qualified RRSP Loan Request form – if applicable. This form is for paper submissions only.
• Proof of assets upon request.
• Proof of income for loans greater than $19,000 or for loans with a term longer than 2 years:
  • Salaried income: pay stub or T4 and Notice of Assessment
  • Commissioned income: last 2 years Notice of Assessment
  • Self-employed income: last 2 years Notice of Assessment and Financial Statements

EASE stands for Electronic Application Submission Entry. It’s B2B Trust’s secure online loan application that allows you - the advisor - to enter, save, print and submit RRSP loan applications on behalf of your clients.

EASE is:

• fast: offers your clients RRSP loan credit decisions in a matter of seconds allowing you to close more business faster
• easy to use: screens are intuitive – both easy to navigate and complete
• practical: search functions allow you to retrieve existing applications and monitor their status
• useful: you can generate a variety of reports for information at your fingertips

In a nutshell, advisors log in to the EASE site (new users can register online) and enter their client’s information. When all pages have been completed, advisors print the application and have the client sign where required. By clicking the “Submit for Credit Review” button, the application is submitted electronically for adjudication; a status is emailed to advisors within seconds. If approved, advisors then forward the printed application (with the original signatures) to B2B Trust for funding.

Be sure to forward all original completed, signed and witnessed loan documents to: B2B Trust, Loan Products Group, 130 Adelaide Street West, Suite 200, Toronto, Ontario M5H 3P5.¹

Quite simply, the benefits of a pre-qualified loan are twofold: first, you’ll quickly know whether your client will be approved even before submitting a full application. And secondly, an abbreviated process means that you’ll have more time to focus on helping more of your clients achieve their investment objectives.

For new clients, our Pre-Qualified RRSP Loan Request is a short form that allows us to perform a high-level credit assessment to determine whether your client will qualify for an RRSP loan. Simply complete this form and fax it to 1.866.941.7711. We’ll notify you so that if approved, you can begin the full application process.

For existing clients, B2B Trust provides a list of pre-qualified borrowers at the start of every RRSP season. If you’re an EASE user, you can access this list by clicking “Pre-Qualified” under the “Loans” folder. If you normally submit paper applications, you can receive a copy of this list by calling one of our client service representatives at 1.800.263.8349.

Privacy laws preclude B2B Trust from pre-scoring, and therefore pre-qualifying borrowers who do not have an active loan with us. Some clients may not appear on the list for a variety of reasons – even though they have an active loan –changes in employment or their financial situation may be contributing factors.

Generally speaking, loans are funded within one business day of receiving original, completed and signed documentation. We know how important it is that funding is done quickly. That’s why we’ve developed checklists that appear on EASE and the application as a reminder of what we need to effectively approve your clients’ loans.

Not at all. We try to accommodate all of your clients’ needs. As such, borrowers may select any day of the month – from the 1st to the 28th – whatever is most convenient for them. Flexible payment dates can be helpful for clients to manage their monthly cash flow.

Clients can choose to make either fixed or variable payments. Regardless of the option they choose, payments are a blend of principal and interest.

Of course. To pay off their loan, the borrower simply forwards a cheque payable to B2B Trust for the full amount outstanding. All loans can be paid out at any time without any additional charge or penalty from B2B Trust.

If you would like more information on any aspect of B2B Trust’s Investment & RRSP Loan Programs, simply call one of our client service representatives at 1.800.263.8349. We’re here to help you get the answers you need. Our client service team would be happy to assist you Monday to Friday from 8 a.m. to 8 p.m. ET.

¹ Please consult your loan program guide and/or contact your dealer head office to verify submission procedures prior to submitting applications through a distribution alliance.

² The example presented is for illustration purposes only. The payment amount may vary based on loan amount, interest rate and loan type selected.