Getting the Lowdown on the Canada Emergency Business Account (CEBA) Loan

Until a couple of months ago, the idea of a pandemic and its implications on Canadian businesses seemed like an exercise in theory. Then along came COVID-19, and with it the government mandated designations of “essential services” and “non-essential services”. Adding to the situation, is the mandatory self-isolation of business owners, employees, suppliers, and customers.

In these unprecedented times, Canadian business owners, especially small to medium-sized enterprises (SMEs) and entrepreneurs are faced with a serious financial dilemma.

How do you keep your business afloat until it can reopen?

The federal government’s Canada Emergency Business Account (CEBA) may be a place to start.

Start By Asking Questions

As with any offer of funding, the first question to ask is “Is this a loan or a grant?” The answer to that question will help you decide if this funding is worth further investigation.

Typically, business owners respond to eligible grant money with a resounding “Yes”. A loan requires more thinking in terms of how it will impact your business now, and long-term.

Here again, there are two questions to ask. Is this a repayable or a non-repayable loan? It is important to weigh the pros and cons of getting a quick cash infusion versus a loan repayment that could create a financial burden for your business.

In the case of CEBA, this is an interest-free repayable loan with a non-repayable component.  

How This Works

Eligible companies are entitled to up to $40,000 to help bridge their gap in cash flow while revenues are down due to COVID-19. If the company repays 75% of that loan on or before December 31, 2022, the federal government will forgive the final 25%.

If you don’t repay the full amount by December 31, 2022, the remaining unpaid amount will be converted into 5-year term loan, interest owing only until it is due, December 31st, 2025.

What to Know Before Your Proceed

This money can only be spent on non-deferable expenses, such as:

  • Wages and other employment expenses to independent (arm’s length) third parties;
  • Rent or lease payments for real estate used for business purposes;
  • Rent or lease payments for capital equipment used for business purposes;
  • Payments incurred for insurance related costs;
  • Payments incurred for property taxes;
  • Payments incurred for business purposes for telephone and utilities in the form of gas, oil, electricity, water and internet;
  • Payments for regularly scheduled debt service;
  • Payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business by the Borrower.

The funds can not be used for prepayment / refinancing of existing debt, payments or dividends, distributions and increases in management compensation.

A closer investigation of funding guidelines show that:

  • an audit may be conducted to confirm your attestation and your eligibility;
  • you give permission for CRA to access any required payroll information;
  • you permit the bank to disclose any info submitted to get the loan to Export Development Canada, and you consent for EDC to share this info for any purpose with any government or any department or agency including CRA and any Crown Corporation.

Who Can Apply 

If CEBA funding sounds like the business lifesaver you were hoping for, it’s time to look into whether or not you qualify.

The criteria for this funding is, on the surface, quite basic. In order to qualify for CEBA, you must have a:

  • Canadian operating business as of March 1st, 2020;
  • business bank account as of March 1st, 2020;
  • financial position in which your company was not behind in payments with the bank by 90 days or more, as of March 1st, 2020;
  • CRA number;
  • $20,000–$1.5 million in payroll, backed up by T4s;
  • haven’t applied before or with any other bank;
  • you intend to continue your business; and
  • you agree to fill out some surveys.

Eligibility for CEBA requires that you meet all of these criteria. Additionally, you will have to attest to the fact that your company is not:

  • a government body, a union, a charitable / religious organization, and if you are, you generate sales revenue;
  • you are not a politician, holding political office; and
  • your organization does not promote violence, incite hatred or is discriminatory in any way.

If your payroll is not high enough or you don’t think you otherwise fit in the government’s eligibility box, don’t fret. As of June 26, 2020, businesses eligible for CEBA now include:

  • owner-operated small businesses that do not have a payroll,
  • sole proprietors receiving business income directly, and
  • family-owned corporations remunerating in the form of dividends rather than payroll.

If you are in this second group of applications, you will need to demonstrate eligible non-deferrable expenses between Cdn.$40,000 and Cdn.$1,500,000 in 2020 that are not also paid by any other Government of Canada COVID response programs:

  • Canada Emergency Wage Subsidy,
  • 10% Temporary Wage Subsidy,
  • Canada Emergency Commercial Rent Assistance, Regional Relief and Recovery Fund,
  • Futurpreneur Canada,
  • Northern Business Relief Fund,
  • Fish Harvester Grant,
  • relief measures for Indigenous businesses, and
  • $250 million COVID-19 IRAP (Industrial Research Assistance Program) Subsidy Program

Next Steps

1.     Talk to Someone

Your bank is a great first point of contact to help confirm your eligibility and the potential maximum amount of funding available to you.

2.     Get Ready

The form asks for your CRA number and T4 amount before the application can be uploaded for determination of eligibility by your financial institution, or if you go the non-payroll eligibility route you will need to upload proof of expenses as part of the application process.

3.     Apply

The application process is online through your bank’s website. If you use multiple banks, choose the one with which you do day-to-day banking.

4.     Reach Out

If you have any questions about this or other funding options, or other funding services, feel free to reach out. My team and I are here to help.

Until next time,


PS: Want to be part of a broader funding community? Share opportunities, get advice, and network? Join the new Canadian Funding group on Facebook and Grant Writers Group on LinkedIn!

This blog post is for information purposes only. As is the case with all funding initiatives, you will want to verify eligibility before moving forward. Read the posted criteria carefully. Keep in mind that all of the current COVID-19 related funding supports are unfolding quickly. In some cases, the criteria is being updated on a weekly / sometimes daily basis.

Check the details on a Government of Canada website to make sure you still qualify, and that you truly understand what is involved in accepting this funding. For additional clarification, talk to a professional – your financial institution, your financial planner, or other reputable source of information and advice.

Jane Ramachandran

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