Your Guide to CEBA Loans

Canadian businesses have faced unprecedented challenges due to the COVID-19 pandemic. In response, the Canadian government implemented various financial relief programs in 2020 to support Canadian businesses. One such program is the Canada Emergency Business Account (CEBA).

As a popular online small business loans platform, we receive many questions about CEBA. That’s why the team at Levr.ai has prepared this guide for more information on:

• CEBA Update – September 2023
• What is CEBA?
• Eligibility Criteria for CEBA Loans
• Applying for a CEBA Loan
• CEBA Loan Amount and Usage
• CEBA Repayment Terms and Deadlines
• CEBA Loan Forgiveness
• Extension of CEBA Repayment Timeline
• Seeking Assistance for CEBA Loan Repayment

CEBA Update – September 2023 

At Levr.ai we’ve been keeping a close eye on any changes to the CEBA loan program that is scheduled to come due at the end of this year (2023). 

In September, the Canadian government made an announcement regarding a program extension, and many small businesses are a little confused. We don’t blame you! Here’s what you need to know:

• There has been an extension to the re-payment deadline from Dec 31, 2023 to Jan 18, 2024 citing that many businesses are extremely busy with year-end activities. These additional 18-days while an extension, for many this falls short on what was expected. 

• The most confusing component of the extension on these loans has been the introduction of any loans not paid in full by Jan 18, 2024 (or at a minimum the portion to take advantage of loan forgiveness and savings) – instead of the loans accruing at 5% per annum over 2 years, CEBA loans now roll into a 3-year term-loan accruing at 5% per annum. This update was made in an effort to make monthly installments on outstanding CEBA loans more manageable (smaller). 

• The biggest take away is that it’s still better to find a way to re-finance your CEBA loan in order to take advantage of the loan forgiveness credit. For many small businesses that continues to be the best overall savings (lowest cost to borrow the full $60K)  and the smart option to exercise. Learn more here.

What is CEBA?

The Canada Emergency Business Account (CEBA) was  a program initiated by the federal government to provide financial assistance to small businesses directly affected by the pandemic. It offers interest-free loans of up to $60,000 to eligible businesses. The loans can be used to cover non-deferrable expenses such as rent, utilities, and payroll. The program was designed to provide immediate relief and support to businesses impacted by COVID-19 hardships.

Eligibility Criteria for CEBA Loans

To have been eligible for a CEBA loan, your business had to meet certain criteria.

Here’s the list of requirements:

• The business must have been in operation as of March 1, 2020.
• Has an active Business Number with the CRA.
• The business must have a federal tax registration.
• Plans to continue to operate its business or to resume operations.

Please note: You can learn more by reading the list of Frequently Asked Questions on the CEBA website. In addition, the eligibility criteria may have varied slightly depending on the financial institution processing the loan. 

Applying for a CEBA Loan

For those businesses that applied for a CEBA loan, businesses typically worked with its primary financial institution. The application process typically involved providing the necessary documentation to verify eligibility and the completion of an online application form. The required documents may have included:

• Business number (BN) or payroll account number (RP).
• 2019 T4 Summary of Remuneration Paid form.
• Business contact information.
• Bank account information.

Once the application was submitted, it was reviewed by the financial institution. If approved, the funds will be deposited into the designated business bank account held at the same financial institution.

Loan Amount and Usage

CEBA loans provided eligible businesses with a maximum loan amount of $60,000. Initially, the program offered loans of up to $40,000, but an expansion in December 2020 increased the limit to $60,000. The funds could have been used to cover non-deferrable expenses, such as:

• Rent or lease payments for commercial properties.
• Utilities, such as electricity, water, and gas.
• Insurance costs.
• Property taxes.
• Salaries and wages.
• Purchase of personal protective equipment (PPE) for employees.

Please note: The funds are used strictly for eligible expenses as outlined by the program guidelines.

Repayment Terms and Deadlines

The government has outlined its recommendation for businesses to repay their outstanding CEBA loan to help businesses avoid future financial burden. The repayment terms and deadlines are as follows:

• The remaining balance of the loan must be repaid on or before January 18, 2024. This date has been extended in the past, however, the government has made it clear this is not happening again.
• Borrowers who repay the loan by the deadline may qualify for loan forgiveness of a portion of the borrowed amount.
• If the borrower borrowed $40,000 or less, 25% of the loan (up to $10,000) may be forgiven.
• For borrowers who borrowed more than $40,000, 25% of the initial $40,000 plus 50% of any additional amount may be forgiven.
• For borrowers that borrowed $60,000 from the start, 33% (up to $20,000) may be forgiven.
• It is crucial to make timely repayments to avoid penalties and interest charges. Failure to repay the loan by the deadline may result in additional financial obligations.

Extension of Repayment Timeline

The repayment timeline for CEBA loans were extended to provide businesses with more freedom to repay their loans. The deadline for repayment was extended from December 31, 2022, to December 31, 2023. In September 2023, there was an additional announcement extending the deadline from Dec 31, 2023 to Jan 18, 2024. This extension allowed businesses to better manage their financial obligations and plan for repayment accordingly.

Please note: The deadline extension does not affect the eligibility criteria or some loan forgiveness terms.

Seeking Assistance for Loan Repayment

If your business is struggling to repay its CEBA loan by the specified deadline, here are some options to consider to ensure you stay current and get the max loan forgiveness value saving you money.