Canada Emergency Business Account (CEBA) Loan Update

Background:

The CEBA program offered an interest-free loan of up to $60,000 to small businesses and not-for-profit organizations.

Eligible CEBA loan holders in good standing who will be repaying the balance of the loan on or before December 31, 2023, will be eligible for a loan forgiveness of up to 33% (up to $20,000).

About 900,000 businesses were approved for CEBA loans of those about 572,000 we eligible to receive the full $60,000 loan, which was aimed to help businesses pay for operating expenses and keep their business going through the public measures during COVID-19 epidemic.

The program closed on June 30, 2021, and the funding period has ended.

Loan Repayment Extension:

On September 14, 2023, the government of Canada announced extended deadlines for CEBA loan repayments by providing:

• Additional year for term loan repayment
• Additional flexibilities for loan holders looking to benefit from the partial loan forgiveness of up to 33%.

The repayment deadline for CEBA loans to qualify for partial loan forgiveness is being extended from December 31, 2023, to January 18, 2024. This is to recognize that the end of December is a busy time for many Canadian businesses.

Businesses are also able to make a refinancing application with the financial institution that provided their CEBA loan by January 18, 2024, the deadline to pay off the loan and benefit from the partial forgiveness of up to 33% will be March 28, 2024. This will allow small businesses to access relief and give them more time to hear back from their financial institutions on the refinancing application.

CEBA converting to term loan:

As of January 19, 2024, outstanding loans, including those that are captured by the refinancing extension, will convert to three-year term loans, subject to interest of five percent (5%) per annum, with the term loan repayment dated extended by an additional year from December 31, 2025, to December 31, 2026. Businesses will automatically have access to a three-year, low-interest loan of up to $60,000 if they have not repaid or refinanced their loan.

Repayment on or before the new deadline of January 18, 2024 (or March 24, 2024, if a refinancing application is submitted prior to January 18, 2024) will result in a loan forgiveness of $10,000 for a $40,000 loan and $20,000 for a $60,000 loan.

Example:

Small Biz A received a $40,000 CEBA loan but is unable to pay the full amount in time to benefit from the $10,000 partial loan forgiveness. On January 19, 2024, the loan converts to a three-year term loan with 5% interest per year. Small Biz A will be required to make monthly interest payments of about $167 and will be required to pay the whole principal loan amount of $40,000 on or before December 31, 2026.

Non-Prof B received a $60,000 CEBA loan and applies for $40,000 in financing from the financial institution that they received the CEBA loan from but does not hear back from the bank by January 18, 2024, Non-Prof B now has until March 28, 2024, to secure new financing to pay off their CEBA loan and benefit from $20,000 in partial loan forgiveness.

Financial institutions will contact CEBA loan holders directly regarding their loans.

For further information and answers to frequently asked questions, please visit Canada Emergency Business Account (CEBA).

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