Strategic Planning & Business Consulting

Navigating the CEBA Loans Program

October 20, 2023

An image of a small business owner in Niagara who is reviewing his CEBA Loan repayment options.

Canadian businesses experienced numerous and unprecedented challenges as a result of the COVID-19 pandemic. In an attempt to ease the burdens faced by small businesses and not-for-profit organizations across Canada, the Federal Government introduced the Canada Emergency Business Account (CEBA) loan program. These interest-free loans proved to be a vital source of financial support for businesses, helping organizations maintain their operations, including payroll, rent, utilities, and other non-deferrable expenses, and navigate the economic challenges resulting from the pandemic.

However, with the repayment due date just months away, it is essential for Canadian businesses and not-for-profits that have utilized this resource to have a firm grasp of when repayment is due, how much is forgivable, and what refinancing options are available.

CEBA Eligibility

Businesses applying for a CEBA loan typically did so through their financial institutions, and organizations had to provide the necessary documentation to demonstrate eligibility and financial need.

For a business or not-for-profit organization to be eligible for the CEBA loan, they had to meet specific criteria and demonstrate that their business had experienced financial hardship as a result of the COVID-19 pandemic. Eligible businesses applied for CEBA loans through their financial institutions, which acted as intermediaries in the application process.

In the early months of the pandemic, some businesses struggled with eligibility when they came up against the condition that their organization had an active business chequing/operating account. However, the condition was removed in October 2020, allowing eligible businesses to apply once they’d opened a business chequing/operating account with their primary financial institution.        

Loan Amounts and Expansions

While the application period for the CEBA Program closed back in June of 2021, prior to that, they were available from more than 220 financial institutions across Canada. These loans were interest-free, and if paid back by the set due date, a portion of the loan would be forgiven.

Initially, CEBA provided a loan of up to $40,000 to eligible businesses and organizations. However, in December 2020, CEBA loans were expanded, and loan holders could apply for an additional $20,000 to a maximum of $60,000.   

CEBA Loan Repayment Deadlines and Available Loan Forgiveness

Repaying a CEBA loan is a key component of the program. Comprehending the repayment terms, including the deadline, interest accrual, and the potential for loan forgiveness, is vital.

Repayments for loans issued from the CEBA Program were initially due on December 31, 2023, to qualify for the forgivable portion. However, as of September 14 of this year, the deadline has been extended to January 18, 2024, so loan holders can repay and take advantage of the available forgiveness. Repayment is typically made through the same financial institution that provided the loan.

For eligible CEBA loan holders who repay the balance of the loan on or before January 18, 2024, loan forgiveness of up to 33 percent (up to $20,000) will be available. For organizations who need to refinance, provided loan holders have submitted a refinancing loan application to the financial institution that issued the CEBA loan by the January 18 deadline and should that business also require a grace period to finalize the payout of their loan, they can still qualify for partial loan forgiveness provided the outstanding principal and applicable interest are paid by March 28.

Refinancing Through Your Bank

While some banks are offering refinancing for the $40,000 loan to obtain the forgivable portion, the Big Six banks have not announced anything yet. However, Meridian, a credit union, may be a possible option. They are offering refinance options up to $40,000 to repay the CEBA loan balance and obtain loan forgiveness from the government.

For loan holders that met CEBA eligibility criteria, are in good standing, and haven’t repaid their loan by the January 18, 2024 deadline, their CEBA loan will convert to a term loan with full principal repayment due on December 31, 2026. During the period of January 19, 2024, to December 31, 2026, an interest rate of 5% per annum will apply to the outstanding balance of the CEBA loan.

Contact DDL & Co. in the Niagara Region to Help You Navigate Your Financial Obligations

Our business advisory experts provide essential support to small business owners, ensuring their organizations remain compliant with applicable regulations and meet all deadlines. DDL & Co.‘s trusted accountants, business consultants, and tax experts provide high-quality accounting, business, and tax services. To learn more about how DDL & Co. can provide you with the best accounting, business, and tax planning solutions, contact us online or by telephone at 905-680-8669.