submitted by Deron Johnston, Old Town Kemptville BIA
The Canada Emergency Business Account (CEBA) loan program was one of the ways that the federal government attempted to provide support to Canadian businesses during the height of the pandemic. During this difficult period, many businesses were forced to close at least temporarily or drastically alter how they operated, causing significant damage to their profitability and financial health.
For many businesses, the CEBA loan (arranged through commercial banks) comprised a total of $60,000 with $20,000 being forgivable if the business was able to pay the unforgivable portion of $40,000 back by the deadline date which was December 31, 2023.
However, with many businesses still not having recovered enough to be able to repay the CEBA loan and with considerable pressure from business groups across the country like the Ontario Business Improvement Area Association (OBIAA) to extend the repayment deadline, the federal government finally agreed to extend the repayment deadline.
To the disappointment of many, the extension date that the government chose was only to January 18, 2024, which works out to be less than three weeks. Those same business groups which lobbied the federal government for extending the repayment deadline byat least one year responded quickly with a chorus of “that’s not good enough!” and in some cases have resumed lobbying the federal government for a further extension.
The government did make another concession which was for those businesses who can’t repay the unforgivable ($40,000) amount by January 18, 2024, but who make a refinancing application with the bank that provided their CEBA loan (before January 18, 2024); their repayment deadline now includes a special refinancing extension until March 28, 2024, to allow for time for the application process.
If a business is unable to repay the unforgivable portion ($40,000) of their CEBA loan and don’t apply for refinancing by January 18, 2024, then the full amount of $60,000 automatically turns into a loan at a 5% interest rate with the same bank where the original CEBA loan was made. The previous repayment deadline for this new loan was December 31, 2025, which made it a two-year loan, but the government decided to extend this new loan repayment deadline for an additional year to December 31, 2026, making it now a three-year loan. This is where some of the initial confusion came from when people heard about a one-year extension on the CEBA loan.
So, in short, if you don’t pay the unforgivable portion ($40,000) of your CEBA loan back by January 18th, 2024, then the whole amount ($60,000) automatically turns into a three-year loan at 5% interest;
OR pay the unforgivable portion ($40,000) of your loan back by January 18th, 2024 and you get to keep the forgivable portion ($20,000); OR make a financing application with the bank that holds your CEBA loan by January 18th, 2024 and you’re given more time for the institution to process the loan application for the unforgivable portion ($40,000) and you can pay it back as late as March 28th, 2024. If your financing application is somehow unsuccessful and you can’t repay the unforgivable amount ($40,000) by March 28th, 2024, then the whole amount ($60,000) automatically becomes a three-year loan at 5%.