Repaying the Canada Emergency Business Account: What You Should Know

Author: brendin-gaucher posted in: Business Law

Understanding CEBA Loans for Small Businesses and Non-Profits

If you are a small business owner or a not-for-profit organization that has received a Canada Emergency Business Account (CEBA) loan, you may be wondering how to repay it and benefit from partial loan forgiveness. The CEBA program is a government initiative that provides interest-free, partially forgivable loans to help businesses cover their operating costs during the COVID-19 pandemic.

Repaying CEBA Loans: Key Considerations for Small Businesses

• The CEBA loans are up to $60,000 and can be repaid by January 18, 2024, to qualify for partial loan forgiveness of up to $20,000. This means that if you repay $40,000 of your loan by the deadline, the remaining $20,000.00 will be forgiven. Likewise, if you repay $30,000.00 of your $40,000.00 by the deadline, the remaining $10,000.00 will be forgiven.
• The government has recently extended the repayment deadline and introduced additional flexibilities for loan holders in response to various economic factors that have delayed the recovery of many businesses after the pandemic. For example, if you make a refinancing application with your financial institution by January 18, 2024, you will have until March 28, 2024, to repay your loan and still benefit from partial loan forgiveness.
• If you do not repay or refinance your loan by January 18, 2024, your loan will convert to a term loan with an interest rate of 5% per annum. The term loan repayment date is December 31, 2026. You will have to make monthly interest payments and pay the full principal amount by the end of the term. For additional information regarding interest applicable to your CEBA loan, contact your financial institution.
• To repay your loan, please contact your financial institution for instructions on how to make a payment.
• The CEBA program may also have tax obligations, reporting requirements and liability issues for your business. For example, you may have to report the amount of loan forgiveness as income on your tax return. You may also have to provide certain documents or information to verify your eligibility or compliance with the program terms and conditions. You may also face legal action if you misuse or default on your loan.

If repayment of your CEBA loan will involve reorganizing your corporate structure or finances, KMSC is here to assist. Our Business Law team is experienced in the provision of all corporate services, including such restructuring.

If you are interested in learning more about how KMSC Law can help you with refinancing, corporate restructuring, or any other aspect of your business operations, please contact us today at (780) 532-7771 or [email protected]. We are here to help you through this challenging time and beyond.