Federal Government Support for small businesses or not-for-profit organizations
With the economic fall-out from the COVID-19 crisis the federal government responded with the introduction of the Canada Emergency Business Account (CEBA). The goal of this initiative is to provide a loan to small businesses or not-for-profit organizations that can be used to pay non-deferrable operating expenses such as payroll, rent, utilities, insurance, property tax and regularly scheduled debt payments. The loan cannot be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.
Canada Emergency Business Account (CEBA)
The Canada Emergency Business Account provides 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, due to the economic impacts of the COVID-19 virus.
The Canada Emergency Business Account can be implemented by eligible financial institutions in cooperation with Export Development Canada (EDC).
There is an advantage to repaying the balance of the loan on or before December 31, 2022 as this will result in loan forgiveness of 25% (up to $10,000) and no interest.
If the loan is not paid by December 31, 2022 then a 3-year term and 5% interest rate is assumed.
The eligibility requirements for the CEBA
The main eligibility criteria around the program is that the Borrower’s total employment income paid in Canadian dollars in the 2019 calendar year was between $20,000 and $1,500,000. There are some additional requirements listed below that would also need to be respected.
- The Borrower is a Canadian operating business in operation as of March 1, 2020.
- The Borrower has a federal tax registration.
- 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.
The steps to receive the CEBA
- You will need to contact your financial institution in which you have your primary business operating account.
- You will need to provide documents to show that you meet the criteria to get the loan. These will include your proof of business registration and your 2019 T4SUM Summary of Remuneration Paid (i.e. contact CRA if you require a duplicate T4SUM).
- You will most likely need to complete and submit an application online.
- Shortly after, the $40,000 will be deposited into your bank account.
The support offered by the Canada Emergency Business Account to small businesses and not-for-profits is one of many initiatives offered by the federal government. As a next step, you are encouraged to consult with your financial planner in order to determine if you qualify for any additional support programs offered by all levels of all governments.