The Government of Canada has recently launched the new Canada Emergency Business Account (CEBA) loan, which has been implemented by eligible financial institutions (the “Lender”) in cooperation with Export Development Canada (EDC).
CEBA is part of the federal government’s loan program for small and medium-sized businesses affected by COVID-19 to ensure businesses have access to the capital they need during these uncertain times.
The $25 billion program will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.
CEBA provides eligible organizations with a loan of $40,000 at 0% interest until December 31, 2022. The remaining balance is then converted to a 3-year term loan at an interest rate of 5% per annum. Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000).
According to The Government of Canada, an eligible organization must:
In addition, per the requirements of the CEBA program, each organization must also confirm:
Funds from the CEBA loan are only allowed to be used by the borrower to pay non-deferrable operating expenses such as payroll, rent, utilities, insurance, property tax and regularly scheduled debt service.
The CEBA loan 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
Eligible organizations must apply online through their primary bank or financial institution.
Applicants should have the following information prepared when applying:
In these uncertain times, it is essential to remain agile and proactive as the COVID-19 situation unfolds. Having timely access to financial experts, insights and news as quickly as possible is critical—and that’s where we can help.
We have established a dedicated COVID-19 Resource Hub, highlighting areas of business operations that will likely be impacted by coronavirus. Whether you need to discuss your current financial situation and learn what options are available to you, or you want to be guided through the appropriate cash flow management strategies for your business, our team of experts are ready to help you at every step of the way. Please do not hesitate to reach out to your Crowe Soberman professionals for support during these challenging times.
We are in this together.
This article has been prepared for the general information of our clients. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article. Please note that this publication should not be considered a substitute for personalized tax advice related to your particular situation.
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