The Canada Emergency Business Account (CEBA): What You Need To Know

The Canada Emergency Business Account (CEBA) is a massive loan program designed to support small businesses and nonprofits in paying operational costs and expenses during the COVID-19 pandemic. 

As the virus continues to wreak havoc on both the domestic and global economy, the Canadian Government chose to expand the program to provide even more money to eligible businesses. 

To help you better understand this program, your options, and how to access the newly released funds, here’s a quick guide to what you need to know about CEBA. 

What is The Canada Emergency Business Account (CEBA)?

The CEBA is a $55 billion program that provides interest-free loans to small businesses and not-for-profit organizations that continue to experience hardships related to the COVID-19 pandemic. 

When the program was first launched, eligible businesses could receive $40,000 to pay on-deferrable expenses. In December the program was expanded to provide an additional $20,000 for a total of $60,000. 

If the loan is repaid in full on or before, December 31, 2022, 33% of the loan (or $20,000) will be forgiven. 

Who is Eligible for CEBA?

For a business to be considered eligible for a CEBA loan, it must meet the following requirements:

  • Must be an active operating business (sole proprietorship, partnership or Canadian-controlled private corporation)
  • Must have been in operation as of March 1, 2020
  • Must have a business checking/operating account (it is not necessary for the account to have been opened prior to March 1, 2020)
  • Must have a CRA Business Number that was active on or before March 1, 2020.

If you are uncertain about whether or not you meet the eligibility criteria, you can use the pre-screening tool for some guidance. It is important to note that being deemed ineligible by the pre-screening tool does not necessarily mean that you are ineligible. You are still free to apply. The tool exists to help you make decisions about your eligibility and whether or not you should proceed.   

How to Apply for CEBA

If you are eligible and decide to proceed with the application, you can do so through your financial institution. Over 220 financial institutions are participating in the program. 

If you have been running your business from a personal bank account, you must set up a business checking/operating account before you apply and then submit the application through the institution where you have established your business accounts. 

There are two application streams for CEBA, the Payroll Stream (for applicants with employment income paid in the 2019 calendar year between $20,000 and $1,500,000) or the Non-Deferrable Expense Stream (for applicants with $20,000 or less in total employment income paid in the 2019 calendar year).

If you fall into the Payroll Stream, contact your financial institution to complete the application. The Government will assess the application and then inform the financial institution. If successful, the financial institution will deposit the funds into your account within 10-15 business days. 

If you fall into the Non-Deferrable Expense Stream, there are a few more steps involved. To be granted a loan under this stream you must: 

  • Have eligible non-deferrable expenses between $40,000 and $1,500,000. These costs could include rent, property taxes, utilities, and insurance. These expenses will be subject to verification and audit by the Government. 
  • Have filed an income tax return with the CRA with a tax year ending in 2019 or if that return has yet to be submitted, 2018. 

The first step is to complete the pre-screening tool. Even if you are declined at this point, you can still apply by following the rest of the process. 

After the screening tool has been completed, initiate the application process with the financial institution that holds your business accounts. Once this step is completed, applicants will be required to visit the CEBA website to provide supporting documentation of the non-deferrable expenses and complete the application. The Government will review this documentation along with the information submitted by the financial institution and if approved, the financial institution will deposit the money into your account in 10-15 business days. 

What’s New With the CEBA?

As the economic impact of the pandemic continues to spread, so does the Government’s response. As such, there are few changes that have been made since the initial launch of the CEBA loan. 

Here’s what has changed:

  • As of December 4, 2020, the CEBA loan for eligible businesses was increased from $40,000 to $60,000
  • After applying for the CEBA loan, you can check the status of your application on the status website. Typically, it will take 5-7 business days from completion for the application to show up in the system so a little patience is necessary. This information will help you track the status of the application but also let rejected businesses know why, and help them determine what they need to do to correct errors, if applicable.  
  • Eligible businesses have until March 31, 2021, to apply for the CEBA loan. 

If you are a business that previously applied for, and received, the initial $40,000 CEBA loan, you can apply for the $20,000 expansion through the same financial institution. Even if you have already paid back the initial $40,000, you are still eligible for the $20,000 expansion. 

What are the CEBA Repayment Requirements?

As with all loans, the time eventually comes to pay them back. The following repayment terms apply to all CEBA loans, including the expansion loan. 

Interest

  • 0% per annum interest until December 31, 2022
  • 5% per annum interest starting on January 1, 2023; interest payment frequency to be determined by your financial institution

Repayments and Maturity

  • No principal repayment required before December 31, 2022
  • If the loan remains outstanding after December 31, 2022, only interest payments required until the full principal is due on December 31, 2025

Debt Forgiveness

If the outstanding principal, other than the amount of potential debt forgiveness, is repaid by December 31, 2022, the remaining principal amount will be forgiven, provided that no default under the loan has occurred

Determining eligibility for these programs can be confusing. How do you know what exactly qualifies as a non-deferrable expense? What if you operate more than one business or have more than one CRA Payroll account? The good news is that the FAQ on the CEBA website clearly answers just about every question you could possibly have and when it comes to clarity around your specific financial situation, the accounting professionals at WTC are available to go over the numbers and provide clarity regarding documentation and eligibility. 

If you need help sorting through your payroll, managing corporate taxes, or setting up your accounting systems, WTC has you covered. Contact us today to learn more about how we can help you during these difficult times.  

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