⚠️ Important Update: As of January 19, 2024, new CEBA loan repayment terms are in effect. If your business hasn’t repaid its loan, you may now be accruing interest. Make sure you understand your new obligations and avoid penalties.
The Canada Emergency Business Account (CEBA) is a government program that was created on March 27, 2020 in response to the economic challenges businesses faced during the COVID-19 pandemic. It provided emergency funding to small businesses and non-profit organizations with the purpose of helping them cover essential expenses, such as payroll, rent, utilities, insurance, property tax, and debt service. While the CEBA loans were backed by the Canadian government, they were facilitated through financial institutions such as banks and credit unions. Ultimately, the program “provided more than $49 billion to approximately 898,000 businesses in partnership with 230+ participating financial institutions” (Government of Canada).
Those who took advantage of the CEBA program when it was available should be sure to effectively manage their loan repayments to avoid defaulting on the loan. Anyone who doesn’t repay their loan when due will be subject to collections.
Understanding the CEBA Loan
The CEBA program was open for applications from April 9, 2020 to June 30, 2021, and it’s not an ongoing option for businesses that are financially struggling.
Eligibility Criteria for CEBA Loans
Businesses that qualified for these loans had to meet the following criteria: 1) “employment income paid in the 2019 calendar year greater than Cdn.$20,000 and less than Cdn.$1,500,000” and 2) “Cdn.$20,000 or less in total employment income paid in the 2019 calendar year and that had Eligible Non-Deferrable Expenses greater than Cdn.$40,000 and less than Cdn.$1,500,000” (Government of Canada).
Loan Amounts and Forgiveness
Businesses could receive CEBA loans of up to $60,000, which were initially interest-free. For those who qualified, up to $20,000 of the loan could be forgiven, depending on the amount borrowed and repaid.
Repayment Deadlines for Forgiveness
The original deadline to repay the loan and qualify for partial forgiveness was December 31, 2023. This deadline was extended to January 18, 2024, for eligible borrowers in good standing.
Additionally, borrowers who applied for refinancing by January 18, 2024, were granted an extension to March 28, 2024, to repay the loan and still qualify for partial forgiveness.
Post-Deadline Terms
Borrowers who did not meet these deadlines are required to repay the full outstanding amount of their loan, with no portion forgiven. These loans have converted to term loans with a 5% annual interest rate, and the full principal is due by December 31, 2026.
4 Strategies for Effective CEBA Loan Payment Management
Anyone with an outstanding CEBA loan, or really any type of business loan, should take the repayment process seriously. Even if it seems daunting at first, it’s possible to effectively manage your loan with intentional planning.
#1 – Budgeting & Financial Planning
Basic budgeting goes a long way with making sure you stay on track with repaying your loan. Take the time to create a comprehensive and realistic budget that includes your loan payments along with your business’s other expenses.
#2 – Prioritizing Loan Repayments
If necessary, adjust your budget to prioritize loan payments in order to avoid default.
#3 – Exploring Loan Forgiveness Options
While the CEBA program has already completed its loan forgiveness process, it’s always worth consulting with your financial institution to find out if there are any more CEBA loan forgiveness options.
#4 – Communicating With Lenders
In addition to communicating with your financial institution regarding loan forgiveness options, you can also ask about any flexible repayment options offered. Some lenders will offer extended repayment terms or temporary payment deferrals to help a business struggling to repay their loan. Each situation is different, so your lender can help you figure out the best approach for your circumstances.
Tools & Resources for CEBA Loan Payment Management
If you are in the process of repaying a CEBA loan, consider using the following resources.
#1 – Financial Management Software
Utilizing a program for financial management is key to tracking and effectively managing your business’s finances. These softwares often include tools for accounting, inventory, payroll, tax filing, invoicing, bank account tracking and reconciliation, expense management, budgeting, payment processing, and accounts receivable/payable management.
Quickbooks is an example of financial management software that’s geared towards small and medium-sized businesses.
#2 – Professional Financial Advice
Seeking professional financial advice can provide you with the expertise and guidance needed to effectively manage your CEBA loan repayment and achieve long-term financial stability. A few ways a professional can help include:
- Strategic Financial Planning
- Loan Repayment Strategy
- Risk Management and Contingency Planning
- Compliance and Regulatory Guidance
#3 – Government Resources & Support
If you have any more questions about the CEBA program or if you interested in additional resources, consider the following:
- CEBA Program Guidelines
- Support Initiatives & Programs
- Business Support Organizations
- Financial Literacy & Education
CEBA Loan: Frequently Asked Questions
- What happens if I miss a payment? If you missed the January 18, 2024, repayment deadline—and did not apply for refinancing by that date—you are no longer eligible for partial loan forgiveness. Your CEBA loan has now converted into a term loan with an annual interest rate of 5%, and the full principal is due by December 31, 2026. Interest-only payments are required monthly until the principal is due. Failing to make these payments can lead to additional fees, potential collections, and impact your business’s credit standing.
- Can I refinance a CEBA loan? Refinancing was allowed only if you applied with a financial institution by January 18, 2024. This gave borrowers until March 28, 2024 to repay the loan and still qualify for partial forgiveness. If you did not meet that refinancing application deadline, you are no longer eligible to refinance in order to qualify for loan forgiveness. However, you may still explore refinancing options through your financial institution to manage repayment under the term loan conditions.
- Will CEBA loans be extended again? As of now, there has been no official announcement from the federal government regarding another extension to the CEBA loan repayment or forgiveness deadlines.
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