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CEBA’s last stand: What happens after the application deadline?

The final application deadline for the Canada Emergency Business Account (CEBA) program has passed. Lasting nearly 15 months, prime minister Trudeau’s relief program provided interest-free loans of up to $60,000 to support hard-hit small businesses and nonprofits affected by COVID-19. The boost was much needed: Over 885,839 businesses have been approved for CEBA loans since the program’s inception in March 2020, with available funds surpassing $48 billion.

But, if you received a loan, in some ways the process has just begun. Here, Coast Capital’s Director of Small Business Banking, Gena Cole, answers a few key questions concerning closing out your loan terms:

1. When does my CEBA loan need to be repaid?

When CEBA first started, a loan of $40,000 was offered to help cover non-deferrable operating costs for businesses affected by COVID-19. In December 2020, the federal government expanded the program so borrowers could apply for an additional $20,000. This was considered round one. If you didn’t apply for the original $40,000, the June 30 CEBA application deadline allowed you to submit an enrolment request for a $60,000 CEBA loan (round 2). You could also continue to apply for a $20,000 CEBA expansion to an existing $40,000 CEBA loan.

Whether you received the $40,000 loan, the $40,000 loan (and $20,000 expansion), or the $60,000 loan (rounds one or two), you need to repay the loan on or before December 31, 2022, to avoid interest. Otherwise, interest-only payments are required on the last day of the month starting January 2023. The entire loan and all accrued and unpaid interest is due and payable on December 31, 2025. More details are provided below.

2. Can any portion of my loan be forgivable?

Yes, it can. But it’s very important to understand the full details of loan forgiveness, which can vary depending on how you applied for your loan. For instance:

  • For members who received $60,000, or $40,000 with the $20,000 expansion(round one of CEBA): If you repay at least $40,000 of your $60,000 loan before December 31, 2022, an amount of $20,000 will be forgiven. If the loan is not repaid by that date, it can be extended until December 31, 2025, at 5% interest. However, none of the loan will be forgiven in that case. (The full $40,000 must be repaid on time before any of the loan balance can be forgiven.)
  • For members who received a $40,000 CEBA loan and repaid it in full and subsequently receive the $20,000 expansion loan: If repayment of $10,000 occurs by December 31, 2022, then $10,000 of the expansion loan will be forgiven.
  • For members who received $40,000 and did not get an expansion loan:If you repay $30,000 of the loan by December 31, 2022, expect $10,000 of the loan to be forgivable.

3. Could I be subject to any interest charges?

No interest applies to your CEBA loan before the date of January 1, 2023. However, beginning on that day, interest accrues on the balance of the term loan at the rate of 5% per year, payable monthly on the last day of each month until the principal is due in full on December 31, 2025.

4. What repayment options do I have?

Coast Capital members have a few different options for repaying their loans:

  • Borrowers can repay their loan at various frequencies (monthly, bi-weekly, semi-monthly, weekly), where the payment is automatically debited from your main demand account at Coast Capital.
  • Lump-sum payments are an option.
  • Borrowers can also submit a full repayment.

5. Are there any benefits to paying off the loan earlier than the deadline?

In short, it depends on your business situation. While your debt is interest-free until December 31, 2022, if you do not pay it off by that date you will lose the forgiveness amount and have to start paying interest off on your loan. So it may not be a bad idea to come up with a plan to have the funds paid off before the due date. If you decide to do that, you can still receive your forgivable amount.

However, in uncertain times, it’s also hard to predict what business expenses might pop up. So you may feel the funds are more useful for you to have on hand. If you’re concerned about overspending, try putting them in a separate business chequing account.

For the latest loan updates and possible changes, visit Coast Capital’s CEBA information page.

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