CEBA Loan Repayment Guide: What You Need to Know

When the pandemic began impacting Canadian businesses in early 2020, the government introduced the Canada Emergency Business Account (CEBA) to help. This program provided interest-free loans of up to $60,000 to businesses and not-for-profits. Although the program stopped issuing new loans in mid-2021, there was a chance for partial loan forgiveness if businesses repaid their loans by a certain date. This deadline was later pushed back to give businesses more time.

Important Updates on Repayment and Forgiveness

• The final date to pay back your CEBA loan and still receive some forgiveness is now set for late March 2024. This is for borrowers who still owe money after an earlier deadline in mid-January 2024.
• Remember, any forgiven loan amount must be reported as taxable income on your tax return.
• Loans not paid by mid-January 2024 will start accruing interest at an annual rate of 5%.

When Do I Need to Repay My CEBA Loan?

The deadlines for paying back your CEBA loan are coming up quickly. It’s crucial to adhere to these deadlines to avoid missing out on the forgiveness opportunity.

• Late March 2024: This is your deadline to pay off the loan (excluding the forgiven part) if you’re still working on repayment after the mid-January 2024 cutoff.
• End of December 2026: This is the absolute final deadline for loan repayment, including the annual 5% interest.

Who Qualifies for Loan Forgiveness?

If your CEBA loan is in good standing and you meet the eligibility criteria, you should be eligible for loan forgiveness. Your loan provider should have informed you by the end of 2022.

Originally, the deadline for repayment to qualify for forgiveness was set for the end of December 2023, but it has since been extended to mid-January 2024. So, if you arrange to refinance your CEBA loan with the original lender by this new deadline, you could still be eligible for forgiveness.

Understanding Partial Loan Forgiveness

The amount of forgiveness you can receive depends on how much you borrowed. You could see up to a 33% forgiveness, with a cap at $20,000.

Here’s a breakdown of how forgiveness is calculated:

• For loans up to $40,000, you could see 25% forgiven. For instance, a $40,000 loan could get $10,000 forgiven.
• For loans between $40,000 and $60,000, the first $40,000 could see 25% forgiven, and the amount between $40,000 and $60,000 could see 50% forgiven. So, a $60,000 loan could see a total forgiveness of $20,000, leaving $40,000 to be repaid by mid-January 2024.

CEBA Loan Repayment Terms

CEBA loans don’t accrue interest until after the due date in mid-January 2024. After this date, any remaining balance will turn into a term loan with a 5% annual interest rate. You’ll then have to make regular monthly payments until the end of December 2026.

Repaying Your CEBA Loan

You should repay your CEBA loan directly to the financial institution where you got the loan. Get in touch with them to sort out your repayment plan. The Canada Revenue Agency (CRA) also offers more information on this.

What If You Can’t Repay?

If you’re struggling to repay your CEBA loan due to the pandemic’s lingering effects, you’re not alone. Many businesses are in the same boat due to inflation and rising borrowing costs.

Contact your lender as soon as you can if repayment seems impossible. Not repaying can hurt your credit score, lead to fees, or even result in asset seizure. Your lender might offer options like a new loan with different terms or advise you to sell assets to cover the debt. Acting quickly is key to avoiding default.

Tax Implications of Loan Forgiveness

The forgiven part of your CEBA loan is taxable. So, if $10,000 is forgiven, you need to include that as income on your tax return.

Next Steps for CEBA Loan Borrowers

If you’re unsure about your eligibility for loan forgiveness or your loan’s status, contact your lender. You might be able to find this information online or talk to a small business advisor at your bank.

Pay attention to the deadlines mentioned earlier, and if repaying your CEBA loan seems challenging, start exploring alternative plans immediately. For more detailed information and frequently asked questions, check the CRA’s website.