- November 15, 2022
- Posted by: Duffin Martin
- Category: Accounting, Consulting, Corporate Taxes, Tax Planning
The Canada Emergency Business Account (CEBA) program has provided interest-free, partially forgivable loans to nearly 900,000 small businesses and not-for-profit organizations to help them navigate the challenges of the COVID-19 pandemic and remain resilient. The loan was given to cover their non-deferrable expenses such as wages, rent, lease payments, property taxes, utility bills, etc.
What you need to know about CEBA loan
You can get all the details on repayment terms and forgiveness for your CEBA loan from the Government of Canada website but we have put together some frequently asked questions regarding CEBA for your assistance. If you have any questions regarding CEBA or other tax matters, please feel free to contact us today!
What is the latest CEBA Deadline Extension?
This program allows small and medium-sized businesses (SMEs) and non-profit organizations (NPOs) to apply for a loan, interest-free until December 31, 2023. Originally these loans were due this coming Dec. 31/22 to get partial forgiveness. The NEW deadline is now December 31, 2023. For eligible CEBA borrowers in good standing, repaying the balance of the loan on or before December 31, 2023 will result in loan forgiveness of up to 33 percent (up to $20,000).
What are Canada Emergency Business Account Repayment Terms?
If a business applied for CEBA, and received the loan, at some point it will have to repay it. The date of repayment will determine how much of the loan’s principal amount, you will have to pay back. All applicants that meet CEBA eligibility criteria will have the following repayment terms:
- 0% per annum interest until December 31, 2023
- 5% per annum interest starting on January 1, 2024; interest payment frequency to be determined by your financial institution
Repayments & Maturity:
- No principal repayment is required before December 31, 2023
- If the loan remains outstanding after December 31, 2023, only interest payments are required until the full principal is due on December 31, 2025
If your CEBA loan is in good standing, and there are no unresolved issues with your previous applications, a portion of your loan may be forgiven: $20,000 for a $60,000 loan and $10,000 for a $40,000 loan.
To qualify for forgiveness, you must repay your CEBA loan (minus the forgiveness amount) before December 31, 2023.
Note: The forgiveness portion of the CEBA program is optional. You may choose not to claim forgiveness.
How much of my CEBA loan could be forgiven?
Your loan forgiveness amount depends on how much you borrowed.
- For a $40,000 loan, if you repay $30,000 by December 31, 2023, the remaining $10,000 may be forgiven.
- For a $60,000 loan, if you repay $40,000 by December 31, 2023, the remaining $20,000 may be forgiven.
- For a $20,000 loan expansion, if you repay $10,000 by December 31, 2023, the remaining $10,000 may be forgiven.
If you choose to repay your CEBA loan and want to claim the forgiveness portion, you will only be required to make the payment without including the forgiveness amount.
How do I qualify for loan forgiveness?
Borrowers that met CEBA eligibility criteria and are in good standing are eligible to receive forgiveness if the outstanding balance of the loan (other than the amount available to be forgiven) is repaid on or before December 31, 2023. Please contact your financial institution for instructions on how to make a payment towards your CEBA loan.
CEBA eligibility criteria validations have been completed for all borrowers and the results of these validations are final. These validations were conducted in partnership with the Canada Revenue Agency (CRA) and revalidated periodically since the launch of CEBA in April 2020 to ensure an accurate reflection of the information in CRA records.
CEBA eligibility was determined based on the criteria established by the Government of Canada. No organization involved in administering the CEBA program has the authority to grant exceptions to these criteria, including your financial institution.
What will happen if I don’t repay?
On January 1, 2024, the outstanding balance of your CEBA loan will convert to a 5-year term loan. No interest applies until January 1, 2024. Commencing on January 1, 2024, interest will accrue on the balance of the term loan at the rate of 5% per annum, payable monthly on the last day of each month. The full balance owing, and any unpaid interest must be repaid in full by December 31, 2025.
If I am about to close my business, do I still have to repay my CEBA loan?
Yes, all applicants that received funding through the CEBA program are required to repay their loan in accordance with the repayment terms of their respective loans. Please refer to the repayment terms provided to you by your financial institution for details regarding your repayment deadline and forgiveness of the loan. For all questions pertaining to the details of your loan such as the loan balance, process for repayment, or other loan account details, please contact your financial institution.
Is my CEBA loan taxable?
The forgivable portion of your CEBA loan ($10,000 or $20,000) is taxable for the year in which you received your loan. Please speak with your accountant or the CRA regarding the tax implications of claiming forgiveness.
Contact DM Tax
Have questions about this or other CEBA or any other COVID-19 programs for Canadian businesses? DM Tax offers a free consult where we get to know your business and determine the next steps to saving you time and money. Click here to request a consultation online.
Final Program Statistics:
|Number of businesses approved for CEBA loans||898,271|
|Number of businesses approved for CEBA expansions||571,851|
|Total funds approved for CEBA loans and expansions||$49.2 Billion|