Canada Emergency Business Account (CEBA)

This program provides interest-free loans of up to $40,000 to small businesses and not-for-profits that carry on active business activities to help cover non-deferable operating costs during a period where revenues have been temporarily reduced. If the balance of the loan is repaid on or before December 31, 2020 25% of the loan will be forgiven (up to $10,000).

The following criteria must be met to qualify for the CEBA:

  • Must be a Canadian operating business in operations as of March 1, 2020
  • Total employment income paid in 2019 calendar year must be between $20,000 and $1.5 million. If payroll was below $20,000 you must meet the following criteria:
    • Must have a Canada Revenue Agency business number and filed either a 2018 or 2019 tax return
    • Must have eligible non-deferrable expenses between $40,000 and $1.5 million.
      • Eligible non-deferrable expenses include:
        • Wages and other employment expenses to non-arms length parties
        • Rent or lease payments for real estate used for business purposes
        • Rent or lease payments for capital equipment used in the business
        • Insurance related payments
        • Payments for property taxes
        • Payments for telephone or utilities (gas, oil, electricity, water, internet) used for business purposes
        • Regularly scheduled debt repayments
        • Payments with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business by the borrower
      • Have an active business chequing/operating account with a lender that was opened on or before March 1, 2020 and was not in arrears on existing borrowing facilities
      • Must not have applied for this program with a different financial institution
      • Intent to continue to operate or resume business operations

Use of CEBA Funds

The funds are only to be used to pay non-deferrable operating expenses such as payroll, rent, utilities, insurance, property tax and regularly scheduled debt repayments.  The funds are not to be used to fund any other types of payments or expenses such as dividends, distributions and increases in management compensation, prepayment of debts or refinancing of debts.

Helpful items to note (CEBA)

CRA reserves the right to review all expenses that the funds were used for.  Please keep track of amounts used to pay the eligible non-deferrable expenses.  CRA may ask to see invoices and any other supporting documentation.  It may be helpful to keep together invoices for the eligible expense that total $40,000 as proof of what the funds were used for.

When the loan is repaid, the forgivable amount of 25% (up to $10,000) is to be included in income at that time.  Consideration should be given to wait until December 2022 to repay the loan as the forgivable amount will increase income and the respective income taxes.  This is especially important if cashflow is an issue.

Find more information regarding this program at https://ceba-cuec.ca/