Canada Emergency Business Account (CEBA)
What Is CEBA?
Introduced on April 9, 2020, CEBA is a government program administered by a number of financial institutions across Canada, based on directions from Export Development Canada.
This program was launched to support businesses and non-profits that have experienced diminished revenues due to Covid-19 by providing partially forgivable interest-free loans. Its intention is to help businesses safely navigate a period of shutdown, and better positioning themselves to resume normal business operations after Covid-19.
The application deadline for this program is March 31, 2021.
HOW MUCH CAN YOU BORROW?
When CEBA first came out, the maximum loanable amount was up to $40,000. As of December 4, 2020, CEBA applicants can now receive up to a $60,000 loan.
CEBA applicants who previously qualified for the initial $40,000 CEBA loan may still apply for the additional $20,000 expansion at the financial institution that provided the initial loan, even if it has already been repaid.
WHO QUALIFIES?
To qualify, the CEBA applicant must:
- be a Canadian operating business in operation as of March 1, 2020;
- have an active CRA Business Number;
- have an active business chequing/operating account with its primary financial institution;
- not have previously used CEBA (except in the case where you had previously been approved for the initial $40,000 loan and would like to apply for the $20,000 expansion – that is allowable) and will not apply for support under CEBA at any other financial institution;
- acknowledge its intention to continue to operate its business or to resume operations; and
- participate in post-funding surveys conducted by the Government of Canada or any of its agents.
CEBA applicants may choose one of two streams to obtain their CEBA loan. The amounts that can be loaned under these streams are the same.
CEBA has undergone a few changes since its initial introduction and the requirements we list above may change without prior notice. If you would like to determine your eligibility for CEBA based on the latest requirements, an online Pre-Screen Tool is available. We would also recommend that you visit your primary financial institution’s website as they may have their loan applications available online which could provide insights as to requirements not on the CEBA website.
WHAT CAN I SPEND THE CEBA FUNDS ON?
Funds are required to be spent on non-deferrable eligible expenses (as defined on the CEBA website) incurred during 2020.
This program is not defined by legislation or regulations; therefore, participants should treat it as they would any business contract and carefully review the terms of their loan before agreeing. Restrictions, if any, may still slightly differ between financial institutions therefore CEBA applicants should carefully review the terms of their loan agreement and take due care in ensuring that funds are spent accordingly.
Repaying The Loan
Repayments can be made any time after October 1, 2020. If the CEBA applicant cannot fully repay the loan by December 31, 2022, the loan is converted into a 3-year term loan with interest fixed at 5%/year. The payment frequency of such interest will be determined by your financial institution and the full principal of the converted loan will be due on December 31, 2025.
However, if you “fully” repay the loan by December 31, 2022, a portion of the loan will be forgiven as follows:
- If you borrowed $40,000 or less, 25 percent of the loan will be forgiven (up to $10,000), or
- If you borrowed more than $40,000 and up to $60,000, $10,000 of the first $40,000 of the loan will be forgiven plus 50 percent of the amounts above $40,000 and up to $60,000 (up to an additional $10,000).
The forgivable portion of CEBA is taxable when received, and if and when repaid would be deductible. Please contact us or a tax professional if you have any questions.
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