Business Credit Availability Program, including CEBA

This program includes:

Canada Emergency Business Account (CEBA)

UPDATE – AUGUST 31, 2020

The application deadline for the Canada Emergency Business Account (CEBA) has been extended from August 31 to October 31, 2020.

The government is working closely with financial institutions to make the CEBA program available to those with qualifying payroll or non-deferrable expenses that have so far been unable to apply due to not operating from a business banking account.

Further details on these changes will be released in coming days, including a new business account opening process through which qualifying businesses will be able to apply.

The Deputy Prime Minister is also announcing that the Business Credit Availability Program (BCAP) is extended to June 2021. Through BCAP, the government is supporting the flow of additional credit that businesses need to maintain operations and keep employees on the payroll. Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) will continue to work with lenders to support access to capital for Canadian businesses of all sizes in all sectors and regions.

CEBA and BCAP are both part of the Government of Canada’s COVID-19 Economic Response Plan, which is helping Canadians and businesses deal with the economic impact of the ongoing pandemic. The measures under this plan are helping businesses protect the jobs that Canadians depend on, keep their doors open, and bounce back as the economy gradually recovers.

UPDATE – JULY 6, 2020:

According to the CEBA site – https://ceba-cuec.ca/, the funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

Some clarification on what “non-deferrable expenses” are have been provided on the RBC application site:

The Eligible Non-Deferrable Expense categories are the following:

  • Wages and other employment expenses to independent (arm’s length) third parties;
  • Rent or lease payments for real estate used for business purposes;
  • Rent or lease payments for capital equipment used for business purposes;
  • Payments incurred for insurance related costs;
  • Payments incurred for property taxes;
  • Payments incurred for business purposes for telephone and utilities in the form of gas, oil, electricity, water and internet;
  • Payments for regularly scheduled debt service;
  • Payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business by the Borrower

As of June 26, 2020, businesses eligible for CEBA now include owner-operated small businesses that do not have a payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll. Applicants will have to demonstrate having eligible non-deferrable expenses between $40,000 and $1,500,000 in 2020.

The changes to the CEBA will allow more Canadian small businesses to access interest free loans that will help cover operating costs during a period when revenues have been reduced, due to the pandemic.   

The program will now be available to a greater number of businesses that are sole proprietors receiving income directly from their businesses, businesses that rely on contractors, and family-owned corporations that pay employees through dividends rather than payroll.

To qualify under the expanded eligibility criteria, applicants with payroll lower than $20,000 would need:

  • a business operating account at a participating financial institution
  • a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return.
  • eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.

Prime Minister Justin Trudeau announced that businesses who spent between $20,000 and $1,500,000 million on payroll in 2019 (previously $50,000 – $1,000,000) will be eligible to receive a loan through the Canada Emergency Business Account (CEBA).  The loan is interest-free until December 31, 2022, and up to $10,000 may be eligible for loan forgiveness.

The maximum amount which will be forgiven will be the greater of (i) $10,000 or (ii) 25% of the balance on January 1, 2021.   Therefore, businesses which don’t borrow the full $40,000 will not have $10,000 forgiven, it will be a lower forgiveness amount equal to 25% of their January 1, 2021 total. You will likely not want to repay this loan early!

Applications for the Canada Emergency Business Account (CEBA) are now open. Log in to your business bank account for details and read the fine print.

Another requirement is the following:

Per the requirements of the Program, as set out by the Government of Canada, you acknowledge that the funds from this Loan shall only be used by you to pay your non-deferrable operating expenses including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

Caution must be taken if you plan on applying for this loan!

Loan Guarantee for Small and Medium-Sized Enterprises

EDC is working with financial institutions to issue new operating credit and cash flow term loans of up to $6.25 million to SMEs.

Co-Lending Program for Small and Medium-Sized Enterprises

BDC is working with financial institutions to co-lend term loans to SMEs for their operational cash flow requirements.

Eligible businesses may obtain incremental credit amounts of up to $6.25 million through the program.

Learn more about the Business Credit Availability Program