To help ensure that small businesses have access to the capital they need to see them through the financial challenges that have been created as a result of COVID-19, the Government of Canada has initiated the Canada Emergency Business Account (CEBA).
Qualifying businesses that had a total payroll of between $20,000 and $1.5 million in 2019 are eligible to receive interest-free loans of up to $40,000 from their financial institution.
Up to $10,000 of that loan can be fully forgivable if paid back by December 31, 2022.
How can I apply for the CEBA?
Businesses should contact their financial institution directly to apply for the CEBA.
What are the eligibility requirements for the CEBA?
To qualify to receive a loan under the CEBA program, the borrower must meet the following criteria set out by the Government of Canada:
- Must be a Canadian operating business that has been in operation as of March 1, 2020.
- Must have a federal tax registration.
- Must have had a total payroll between $20,000 and $1.5 million in 2019.
- Must have an active business chequing/operating account with their lender, which is its primary institution.
- This account must have been opened on or prior to March 1, 2020 and was not in arrears with existing borrowing facilities, if applicable, with the lender by 90 days or more as of March 1, 2020.
- Must have not previously used the program and will not apply for support under the program with any other financial institution.
- Must acknowledges its intention to continue to operate its business or to resume operations.
- Must agrees to participate in post-funding surveys conducted by the Government of Canada.
It should be noted that the loan shall only be used to pay non-deferrable operating expenses, including, payroll, rent, utilities, insurance, property tax, and regulator scheduled debt service. It should not be used to fund any payments or expenses such as repayment/refinancing of existing indebtedness, payments of dividends, distributions, and increases in management compensation.
On May 19, 2020, the Government announced new eligibility criteria, which made the CEBA available to sole proprietors, businesses that rely on contractors and family-owned corporations that pay employees through dividends. The launch date for applications under the new criteria will be announced shortly.
The Government of Canada has stated that they are currently working on potential solutions for entrepreneurs who operate their business using their personal bank account, as opposed to a business account, or those who have yet to file a tax return.