Do You Qualify for the $40,000 CEBA Small Business Loan?

It was recently announced by the federal government that they would take immediate action to support Canadians and businesses through these challenging times. The new application window begins on Friday, June 19, 2020. This allows for businesses that did not qualify for the Canada Emergency Business Account (CEBA) initially to qualify under the new eligibility rules. More specifically, if you were ineligible due to the lack of payroll or taking payments in the form of dividends, you would be able to apply under the new expanded rules.  

Great! But what is CEBA? 

The Canada Emergency Business Account, or CEBA, allows small businesses to access enough capital to see them through the COVID-19 pandemic. It was implemented by the Government of Canada collaboratively with leading financial institutions and Export Development Canada (EDC). Together, this $55 billion program will provide qualifying business owners access to $40,000 in interest-free loans.  

More specifically, there will be: 

• Zero per cent interest until December 31, 2022. 
• There will be no fees or penalties until the specified date of December 31, 2022. 
• There will be 25 per cent loan forgiveness (up to $10,000) if you are able to provide repayment on your loan before December 31, 2022.  
• If you are not able to pay back the loan by December 31, 2022, you will be incurring a three-year term loan at a 5 per cent annual interest fee to be paid monthly which goes into effect January 1, 2023.  
• The entire balance of the loan should be repaid by December 31, 2025.  

The funding that is provided by CEBA can only be used to pay non-deferrable expenses by the business. This may include payroll, rent, utilities, and others. The funds from the loan may not be used for purposes such as payments of dividends or the distribution or increase in the compensation of management or others. For a more comprehensive list on the restrictions of CEBA funds, please visit the CEBA program website. 

What are the expanded eligibility requirements for CEBA? 

The new expanded eligibility requirements for the Canada Emergency Business Account are as follows:  

• The Canadian business needs to be in operation as of March 1, 2020.  
• The Canadian business requires a federal tax registration. 
• The total employment income paid by your business in 2019 must be between $20,000 - $1,500,000.  
• If your total employment income paid is $20,000 or less in 2019, you must have the following:
• Your business must have a Canada Revenue Agency Business Number (BN – 15 digits) with a tax return in 2018 or 2019 that has been filed. 
• Your business must have eligible non-deferrable expenses which may include costs such as rent, property taxes, utilities, and insurance. The Government of Canada may review and audit these expenses for verification.   
• The business applying for the loan must have an active chequing or operating account with the financial institution it is applying with. Furthermore, the account must have been opened on or prior to March 1, 2020.
• The business applying for the loan must not have previously used the program. They may also not be eligible to apply for support at other financial institutions for the same program. 
• By applying for CEBA, the business plans to continue or resume its operations during these challenging times.  

For a more detailed explanation on the eligibility requirements, please visit the CEBA program website.  

How can I apply for CEBA? 

When the program becomes available on Friday, June 19, 2020, the businesses that qualify are required to contact their primary financial institution to apply for CEBA loans through two application streams. 

1) The Payroll Stream is applicable for businesses that have greater than $20,000 and less than $1,500,000 of total employment income paid in 2019. The financial institutions that hold the primary business chequing/operating account will complete their CEBA applications directly. The Government of Canada will inform your primary financial institution about the outcome of your application after reviewing them thoroughly. If you have been approved for a CEBA loan, your primary financial institution will provide the funds to your business chequing/operating account.  

2) The Non-Deferrable Expenses Stream is applicable for businesses that have $20,000 or less of total employment income paid in 2019. They also have greater than $40,000 and less than $1,500,000 in 2020 Eligible Non-Deferrable Expenses. This application stream follows a two-step process.  

• Step 1: The loan applicants must submit their applications to their primary financial institution which they use for their primary business chequing/operating account. The financial institution will then direct the applicants to Step 2.
• Step 2: The loan applicants will be directed to a CEBA website to provide further documentation to aid their application of the 2020 Eligible Non-Deferrable Expenses.  

The Government of Canada will inform the financial institution after reviewing and assessing the applications. If you have been approved, the financial institution will provide the funds directly to your business chequing/operating account.  

You may go through the application process in more detail through the CEBA program website. Should you have any questions or need any help navigating what to do, StyleLabs is here to lend a hand. Just give us a shout and we'll do whatever we can to assist.