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Before making a major financial decision you
should consult a qualified professional.
Maximum loan amount: $60,000, with $20k of $60k forgivable.
As of October 26, 2020: Eligible businesses operating through a personal
bank account can apply for CEBA - but must open a business account first. See news
release.
CEBA was launched on April 9, 2020. It provided interest-free bank loans,
guaranteed by the government, of up to $60,000 to small businesses and to
not-for-profits that are operating businesses. If the balance of the loan
is repaid on or before December 31, 2023, this will result in 25% (up to
$10,000) of the $40,000 loan being forgiven, and 50% (up to $10,000) of the
$20,000 loan expansion being forgiven. The new
deadline of 2023 was announced by the Department of Finance on January 12, 2022,
and this will apply to all eligible borrowers in good standing.
CEBA Deadline Extension to January 18,
2024
On September 14, 2023 the deadline for repayment of the CEBA loan, in order
to qualify for partial forgiveness, was extended to January 18, 2024 for
eligible CEBA loan holders in good standing. The
deadline is extended to March 28, 2024 if a refinancing application is submitted
prior to January 18, 2024 at the financial institution that provided the CEBA
loan. However, 5% per annum interest accrues starting on January 19, 2024,
which must be paid by March 28, 2024, along with the principal, in order to
qualify for the partial debt forgiveness.
Tax Tip: If possible, repay your CEBA loan by December 31,
2023 in order to avoid problems.
CEBA Loan Forgiveness Requirements Re Deadline Extension - Caveats:
- If $60,000 was borrowed, no forgiveness is available unless
$40,000 (total owing from both loans) is repaid.
- If refinancing application is submitted prior to January 18, 2024, 5%
per annum interest accrues starting on January 19, 2024, which
must be paid by March 28, 2024, along with the principal, in order to qualify
for the partial debt forgiveness
- Loan holders will be
contacted in the coming months by their financial institution to confirm
their eligibility for the January 18, 2024 repayment deadline to qualify for
partial loan forgiveness.
Many businesses have already been told they were not eligible for a CEBA
loan, even though it had been granted based on information they provided in the
application. These businesses will not have any portion of the loan
forgiven, but they will still have until Dec 31, 2023 (now January 18,
2024) to pay back the loan.
As of December 4, 2020, CEBA loans increased from $40,000 to $60,000,
with $20,000 forgivable. Businesses who had received the $40,000 loan were
able to apply for the $20,000 expansion.
Important:
If you're considering applying for the additional $20,000 CEBA loan, be aware
that it can change the requirements for the original $40,000 loan. If your
attestation for the $40,000 said you could use the funds for "without
limitation, payroll" etc., that will be changed to use for only Eligible
Non-Deferrable Expenses, which includes only non-arm's length payroll (i.e., not
owners' wages). See the Crowe Soberman article CEBA
Expansion - Think Twice Before Applying for the Additional $20,000.
Applications were online only, through your financial institution, and
could be accessed by telephone or
at your
branch. Applications closed June 30, 2021.
CEBA Term Loan information for the big 6 Canadian banks
- expanded to enable businesses and not-for-profits eligible for CEBA
loans, that continue to be seriously impacted by the pandemic, to access an
interest-free loan of up to $20,000, in addition to the original CEBA loan of
$40,000.
- half of the additional financing is forgivable if repaid by December
31, 2022.
- application deadline for CEBA extended to December 31, 2020.
- attestation of the impact of COVID-19 on the business will be
required to access the additional funding.
If your bank has set up your CEBA loan so that it is a line of credit, it's
very important for you to transfer the funds from the line of credit to your
operating account, because the forgivable 25% is based on the maximum balance of
the loan up to December 31, 2020, at least for the $40,000 loan. See Beware
of CEBA accounts set up as LOC's - you might not get the $10,000 loan
forgiveness you were expecting. Apparently RBC has set up the CEBA
loan like a Visa, which would have the same result.
Although all applications and approvals are handled by financial
institutions, Export Development Canada has set up a CEBA call centre which
may help you with any problems you're having with the status of your application. The number is
1-888-324-4201. The centre is open Monday to Friday from 8 am to 9 pm EST
and will address the following types of questions:
- What is the status of my application
- Why was my application declined?
- Why was my submitted document rejected?
However, our call regarding a couple of general issues not
related to a particular application were not
answered other than to say that the criteria on the CEBA website are the
correct criteria, not necessarily the documentation provided by the financial
institution.
The CEBA Frequently Asked
Questions (FAQ) have a list of the types of documents that are considered
invalid as proof of 2020 Eligible Non-Deferrable Expenses.
Documentation is required for applications under the non-deferrable expenses
stream.
Conflicting Information on CEBA Documentation
Some documentation provided under the payroll stream indicates that "The Borrower is a business that is a
sole proprietorship, partnership or a Canadian-controlled private corporation
("CCPC") that was in operation in Canada on March 1, 2020."
This would exclude not-for-profit corporations, although the CEBA FAQ
indicates that non-profit organizations, registered charities, unions, etc are
excluded unless they are actively carrying on a business in Canada that earns
revenue from the regular supply of property/goods or services. It would
also exclude cooperative corporations, which are not excluded according to the
CEBA FAQ.
Other documentation under the payroll stream indicates that "The Borrower was a Canadian
operating business in operation as of March 1, 2020." This agrees
with the CEBA FAQ.
See Payroll Stream below for conflicting information on payroll to non-arm's
length parties.
The Payroll Stream applications are available through your bank, for businesses with payroll of $20,000 to $1,500,000.
CEBA funds can be used to pay non-deferrable operating expenses including
payroll.
Can payroll be to non-arm's length parties? It depends on which
documentation you look at. Some documentation for payroll stream
applications says "without
limitation, payroll, ..." and other documentation says "wages and other
employment expenses to independent (arm's length) third parties". The CEBA FAQ
at first did not say that payroll was limited to arm's length third
parties. It changed at some point (perhaps when the non-deferrable
expenses stream started?), to say that eligible non-deferrable expenses did not
include non-arm's length expenses. We've tried accessing previous versions
of the website using the Wayback
Machine, but it seems unable to access the previous CEBA website versions.
Non-deferrable expenses also include rent, utilities, insurance, property tax and regularly scheduled debt
service. The funds cannot be used to fund prepayment/refinancing of
existing debt, payments of dividends, distributions and increases in management
compensation.
CEBA Payroll Stream
Eligibility Reversal October 2021
It's been reported that some CEBA applicants have received notifications from
their financial institutions that they are now not eligible for the loans they
were approved for and received a long time ago. A reason is not
necessarily given, but it appears that if the payroll was $20,000 and not
$20,000.01 or more, CRA is deeming the applicant to be ineligible. There
is no appeal process.
Anna Malazhavaya, Advotax Law tax lawyer, and Joseph Devaney, CPA, CA of Video Tax
News, are trying to
get an idea of how big this issue is, and trying to sort out what is going on.
If you're a tax preparer who has clients who are affected, go to Anna's
LinkedIn post on this, or to the Facebook Canadian Tax Nerds group where there is are posts on this by Anna, who has been contacted by CBC on this.
Search the group for "CEBA" to find the posts from Oct 8 and Sep 30
2021.
Non-Deferrable
Expenses Stream - Opened June 26, 2020
On May
19, 2020 the government announced the expansion of the CEBA program to
include sole proprietors, businesses that rely on contractors, and family-owned
corporations that pay employees through dividends rather than payroll.
As with the CEBA payroll stream, this application is done online through
your financial institution and cannot be accessed by telephone or your
branch.
To qualify, applicants with payroll lower than $20,000
(Non-Deferrable Expenses Stream) per year would need:
- a business operating account at a participating financial
institution,
- a CRA business number, and to have filed a 2018 or 2019 tax return,
and
- eligible non-deferrable expenses between $40,000 and $1.5 million in
the 2020 calendar year. This could include costs such as rent, property taxes, utilities
and insurance.
The CEBA FAQ were updated
on June 15th regarding applications under the expanded program, with further
requirements for applications under the "Non-Deferrable Expenses Stream",
including the submission of supporting documentation for 2020 eligible
non-deferrable expenses. The process for this type of applications was
available starting June 26th. The application process will take longer than the process for those
done under the "Payroll Stream". Funding will be received
within 10-15 business days for approved applicants.
Update
June 30, 2020: CEBA FAQ now has information on exactly which
non-deferrable expenses are eligible for the non-deferrable expenses stream, and
what documentation must be provided to support these expenses. See the Video
Tax News article CEBA FAQ on document upload relased, which also links to the CEBA Upload Guide.
The May 19th press release also said that "the government will work on
potential solutions to help business owners and entrepreneurs who operate
through their personal bank account, as opposed to a business account, or have
yet to file a tax return, such as newly created businesses". As of
October 26, 2020, this can now be done.
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