In a move to support small businesses and not-for-profit organizations, the Canadian government has extended the deadlines for the Canada Emergency Business Account (CEBA) loan repayments.
This extension, announced on September 14, 2023, provides much-needed relief, allowing businesses more time and flexibility to manage their finances.
Understanding CEBA: A Lifeline for Businesses
The CEBA program, launched on April 9, 2020, was a lifeline for nearly 900,000 small businesses and not-for-profit organizations in Canada.
It offered interest-free loans of up to $60,000, helping organizations cover essential operating costs during the pandemic. The initial application period lasted until June 30, 2021, during which $49 billion was distributed to businesses across the country.
Extended Deadlines: What You Need to Know
Under the new extension, the repayment deadline to qualify for partial loan forgiveness of up to 33%, has been extended from December 31, 2023 to January 18, 2024. This extension recognizes the busy year-end period for Canadian businesses and provides them with extra time to manage their finances effectively.
For businesses looking to benefit from partial loan forgiveness, there's even better news.
If a refinancing application is submitted to the financial institution that provided the CEBA loan by January 18, 2024, the repayment deadline extends further to March 28, 2024. This extension gives businesses more time to secure refinancing and benefit from the forgiveness program.
New Terms: What Businesses Can Expect
Starting from January 19, 2024, outstanding loans, including those covered by the refinancing extension, will convert to three-year term loans. These loans will carry a low-interest rate of five percent per annum.
The repayment deadline for these term loans has also been extended by an additional year, from December 31, 2025, to December 31, 2026. This means that businesses have access to a three-year, low-interest loan of up to $60,000 if they haven't repaid or refinanced their loan by the forgiveness deadline. This extension provides businesses with a crucial financial cushion, allowing them to manage their repayment at a lower borrowing cost.
How Businesses Can Benefit
Let's consider a couple of scenarios to understand how this extension benefits businesses:
Tim and Rebecca need to pay off their $40,000 CEBA loan. Unfortunately, they can't pay the full amount by January 18, 2024 to take advantage of the $10,000 in partial loan forgiveness. As a result, the loan will convert to a three-year term loan with a five percent annual interest rate on January 19, 2024.
Under this loan, they'll make monthly interest payments of around $167 and will only need to pay the principal amount just before the term loan repayment deadline of December 31, 2026.
Doug and Richard applied for $40,000 in financing from the bank that provided their CEBA loan to pay off the $60,000 CEBA loan. Unfortunately, Doug and Richard didn’t receive a response to their refinancing application by January 18, 2024.
However, because they submitted a refinancing application before the deadline, the pair has until March 28, 2024, to secure new financing and benefit from the $20,000 in partial loan forgiveness.
What Businesses Need to Do
The CEBA extension offers a vital lifeline to Canadian businesses, giving them the flexibility and time they need to navigate their financial challenges. This initiative reflects the government's commitment to supporting the backbone of the Canadian economy – its small businesses and not-for-profit organizations.
If you have an outstanding CEBA loan and aren’t sure where to start on your CEBA repayment extension, contact Koroll & Company today. Our team of chartered professional accountants are ready to help.
