Canada Emergency Business Account FAQ

Insights
| 6/18/2020
What is CEBA

CEBA is a $55 billion program that provides interest-free loans of up to $40,000 to small businesses and not for profits. The borrowed funds are to help cover operating costs during a period where revenues have been temporarily reduced. The loan will better position entities to quickly return to providing services and creating employment.

On May 19, 2020, the federal government announced an expansion to the eligibility criteria for the CEBA, making it available to more Canadian small businesses, including:

  • Sole proprietors receiving income directly from their businesses;
  • Businesses that rely on contractors; and
  • Family-owned corporations that pay employees through dividends.
Who is Eligible for the CEBA

There are two qualifying streams for the CEBA.

1. The borrower’s total employment income paid in the 2019 calendar year is between $20,000 and $1.5 million.

2. The borrower’s total employment income paid in the 2019 calendar year is less than $20,000.

To qualify for the loan, all applicants must:

  • Have a Canadian operating business in operation as of March 1, 2020;
  • Have a federal tax registration (or business number);
  • Have an active business chequing/operating account with a primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities with the financial institution by 90 days or more as of March 1, 2020;
  • Have not previously used the Program and will not apply for support under the Program at any other financial institution;
  • Acknowledge their intention to continue to operate their businesses or to resume operations; and
  • Agree to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

Applicants with payroll under $20,000 will also need:

  • A Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return; and
  • Eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance. 
Who is Excluded from the CEBA?

The following are not eligible entities to borrow from the CEBA program:

1. Government organizations or bodies, or entities wholly owned by a government organization or body.

2. Non-profit organization, registered charity, union, or a fraternal benefit society or order, or an entity owned by such an organization, unless the entity is actively carrying on a business in Canada (including a related business in the case of a registered charity) that earns revenue from the regular supply of property/goods or services.

3. An entity owned by any Federal Member of Parliament or Senator.

4. An entity promoting violence, inciting hatred or discriminate on the basis of sex, gender identity or expression, sexual orientation, colour, race, ethnic or national origin, religion, age, or mental or physical disability, contrary to applicable laws.

How Do I Apply?
Small businesses and not for profits should contact their financial institution to apply for these loans. There are currently 233 financial institutions participating in the CEBA program, find the complete list here.
What Do I Need When Applying?

Eligible businesses will be required to contact their primary financial institution to apply for the CEBA loans. There are two application streams:

1. Payroll Stream: for businesses with total employment income paid to employees in 2019 greater than $20,000 and less than $1,500,000.

CEBA applications under the Payroll Stream will be completed directly through the financial institution in which your business holds its primary business chequing / operating account.

Once you will have completed your application, the Government of Canada will assess the application and inform your financial institution of the approval or decline of the loan. If approved, your Financial Institution will provide the funds into your business chequing / operating account.

Financial institutions provide application information to the Government of Canada to confirm eligibility. If successful, the Government of Canada will notify your financial institution and provide funding for your CEBA loan.

2. Non-Deferrable Expenses Stream: for businesses with total employment income paid to employees in 2019 of $20,000 or less and 2020 Eligible Non-Deferrable Expenses (subject to adjustments for support or subsidies under other Government of Canada COVID response programs) greater than $40,000 and less than $1,500,000.

CEBA applications under the 2020 Eligible Non-Deferrable Expenses Stream will follow a two-step process:

Step 1: Businesses will initiate applications directly at their primary financial institution where they hold their primary business chequing / operating account. The financial institution will then direct applicants to Step 2 of the application process.

Step 2: Following the initial application through your financial institution, applicants will be directed to a CEBA website to provide supporting documentation of the 2020 Eligible Non-Deferrable Expenses and to complete the application.

The Government of Canada will assess application information submitted via financial institutions in Step 1 together with the supporting documentation and information provided in Step 2. If successful, the Government of Canada will notify your financial institution and provide funding for your CEBA loan.

When Will I Receive My Funding?
Once you have applied at your primary financial institution, uploaded all necessary supporting documents, and if pre-funding eligibility validation is successful, you should expect funding within 10-15 business days.
Are There Restrictions on How I Use the CEBA

Yes, the borrowed funds can only be used by the borrower to pay non-deferrable operating expenses of the borrower including, without limitation, payroll, rent, utilities, insurance, property tax, and regularly scheduled debt service.

The funds may NOT be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

What Documents Are Required for the Non-Deferrable Expenses Stream?

Three main pieces of information is required to complete the application:

  • Name of the financial institution where you submitted your application;
  • Your nine-digit business number (same number you used in your application with your financial institution); and
  • Electronic or paper copies of receipts/invoices/agreements to be uploaded as evidence of your 2020 Eligible Non-Deferrable Expenses
What are the Eligible Non-Deferrable Expense Categories?

The Eligible Non-Deferrable Expense categories are the following:

  • 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
What Other Federal COVID Response Programs Will Cause Adjustments to the Amount of 2020 Eligible Non-Deferrable Expenses that can be Reported?

Other Government of Canada COVID response programs include the following:

  • 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
  • $250 million COVID-19 IRAP (Industrial Research Assistance Program) Subsidy Program
If Applying Through the Payroll Stream, What do I do if I Have More than One Canada Revenue Agency (CRA) Payroll Program Account?

Applicants should add together all 2019 T4SUM statements and compare that total amount against the CEBA eligible payroll range, which is a payroll amount greater than $20,000 and less than $1,500,000.

For example, a business with the following two payroll numbers would have a total payroll amount of $35,000, which is within the eligible range:

Payroll number 1 (…RP0001)

  • 2019 T4SUM = $15,000

Payroll number 2 (…RP0002) 

  • 2019 T4SUM = $20,000

Total 2019 T4SUM = $35,000

What if I Run More Than One Business?
Each qualifying business must have a unique nine-digit Canada Revenue Agency (CRA) Business Number. Each qualifying business is limited to one CEBA loan.
What if I Run My Business Out of a Personal Bank Account?

Businesses who operate their banking through a personal bank account are not eligible for the CEBA loan.

Only business chequing/operating accounts opened on or prior to March 1, 2020 and not in arrears on existing borrowing facilities, if applicable with the Lender by 90 days or more as of March 1, 2020 are eligible for the CEBA program.

How Do I Repay the CEBA

The loan can be repaid at any time without penalty.

$10,000 (25%) of the $40,000 loan is eligible for complete forgiveness if $30,000 is repaid on or before December 31, 2022.

If the loan is not repaid by December 31, 2022, it will be extended into a three-year term loan bearing an interest rate of 5% per year.

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