The deadline to apply for the Canada Emergency Business Account (CEBA) interest-free loan up to $40,000 is a hard deadline of next Monday, August 31, 2020.

Up to 25% of the loan (up to $10,000) may be forgiven (may be taxable) if 75% of the loan is repaid by December 31, 2022.  If the loan is not repaid by then, it can be extended for an additional 3 year term with interest at 5% per year.

This loan is applied through a business’ (or not-for-profit) main financial institution.  The loan is intended to help the business pay for operating costs (see “Eligible Non-Deferrable Expenses” list below) that it is not able to defer as a result of COVID-19. CEBA is not intended to provide income support, or support for variable operating expenses to businesses.

Eligibility:

• The Borrower is a Canadian operating business or not-for profit in operation as of March 1, 2020.   (Note – more than one company in a related group may apply)
• The Borrower has a federal tax registration (business number).
• The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as at March 1, 2020.
• The Borrower has not previously used the Program and will not apply for support under the Program at any other financial institution.
• The Borrower acknowledges its intention to continue to operate its business or to resume operations.
• The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

• Applicants must fall under 1 of 2 streams:

• Payroll stream – Applicant issued 2019 T4s with employment income more than $20,000 and not more than $1,500,000 (Box 14) – the easier stream.   Applicants would apply online with their primary financial institution;

• Non-Deferrable Expenses stream – Applicant issued 2019 T4s with $20,000 or less (even nil) in 2019  – the harder stream. Applicants will need to have CRA BN and filed a 2018 or 2019 tax return for 2020 Eligible Non-Deferrable Expenses between Cdn.$40,000 and Cdn.$1,500,000 in 2020 (upload support for at least $40,000 committed/paid as of March 1 2020 to the CRA website https://application-demande.ceba-cuec.ca/).  Expenses are considered “Eligible Non-Deferrable Expenses” if they were already incurred in January and/or February 2020, or are due to a legal or contractual obligation as at March 1 and cannot be avoided or deferred beyond 2020 even during a period of shut down and depressed revenues as a result of COVID.

Use of Funds:

Based on some of the major banks’ loan agreements (not on the CEBA website), it appears that under both the (1) Payroll stream and (2) Non-Deferrable Expenses stream (not just the 2^nd stream):

• the loan proceeds are to be used to pay Eligible Non-Deferrable Expenses in 2020 (Watch:  for applicant under the (2) Non-Deferral Expenses stream – the expenses must be spent or committed by March 1, 2020); and
• Eligible Non-Deferrable Expenses does NOT include wages or other employment expenses to non-arm’s length (related) persons.   We suggest the Borrower confirm with their primary financial institution.

Qualifying Spend – “Eligible Non-Deferrable Expenses”:

Items to Note:

• Does not include dividends.
• It is also adjusted/reduced by other COVID-19 assistance (see below)
• 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, and
• $250 million COVID-19 IRAP (Industrial Research Assistance Program) Subsidy Program

See Further Information Below:

• Federal Government:

Canada Emergency Business Account (CEBA) – Program Overview

Canada Emergency Business Account (CEBA) – Application

News Release – More Small Businesses Can Soon Access the Canada Emergency Business Account

• TD Bank CEBA Loan Agreement: Click Here to View

If you have any questions, please contact your financial institution or your DMCL advisor.