What Is the Canada Emergency Business Account also know as CEBA?Fast Action Finance
It has been said that a global pandemic hits the world every 100 years. As history teaches us, the world was stuck with the Spanish Influenza in 1919. Right on schedule, the first cases of coronavirus COVID-19 appeared in 2019, exactly 100 years later, and the pandemic entered full force in 2020.
Millions of Canadians are now suffering due to this pandemic, be it through disrupting their social lives, loss of employment, closing of their businesses, sickness and fear of sickness. The general mood and moral of Canadians is at an all time low with the upheaval in society and the prospect of succumbing to the COVID-19 sickness. With the widespread suffering caused by this pandemic, the federal government has stepped forward with various programs to assist Canadians caught short by the legislated closing of nonessential businesses. These programs may not by themselves replace what is lost, but it is a step in the right direction, and will help while waiting for a return to our normal society.
To assist business owners who have experienced hardships, the federal government has introduced the Canada Emergency Business Account also known as CEBA.
Below are the details of the CEBA and how it is designed to assist business owners during there stressful times.
What is the Canada Emergency Business Account also know as CEBA?
The recently announced Canada Emergency Business Account (CEBA) has been introduced by the Federal Department of Finance. Its purpose is to provide up to $40,000 in loans to small businesses, whether they are for profit, not for profit or charities. They funds are to be used to cover business expenses and hopefully encourage business to keep all or some of its staff employed.
Will My Business be Eligible for The CERB Loan?
To qualify for a CEBA loan the applicable business must have a T4 summary showing that their payroll was between $50,000 to $1,000,000 in 2019. In addition, the applicable business must have qualified as being able to claim the federal small business deduction, that is that they earn active, not passive income.
Who Actually Lends the CEBA Loan?
The CEBA loan will be administered and funded by the small businessâ€™ bank. The loan is guaranteed by the federal government so the bank should approve the loan based solely on the governmentâ€™s requirements. The one requirement that the applicable bank has is that the small business must have an active account set up with them on or before March 1, 2020 and that online banking is set up.
When Can I Get the CEBA Loan?
The CEBA loan program is expected to start in mid April 2020. Expect to receive information by email from your bank explaining the process to you. Be sure to register for online banking with your bank and to have an active email address in your profile. The CEBA loan will be available registration until December 31, 2020.
Is There Interest on the CEBA Loan?
The CEBA loan is interest free until January 1, 2023, and only on the outstanding balance at that time. After that the interest will be at five percent (5%) per annum.
What Are Some of the Benefits of the CEBA Loan?
The CEBA will allow a small business to borrow up to $40,000 on a government guaranteed revolving line of credit loan to help eligible businesses, with no interest until January 1, 2023. After that time interest will be at five percent (5%) per annum. For amounts still outstanding after December 31, 2020, the loan balance will be converted into a five year non revolving term loan that will mature on December 31, 2025.
Do I Have to Pay the Whole $40,000 Back?
The quick answer is no. If you pay 75% of the balance of the CEBA loan that was owed on January 1, 2021, and pay it on or before December 31, 2022, then you are only required to repay 75% on this amount (owing on January 1, 2021). This gives you a maximum benefit of keeping $10,000 that you do not have to pay back. The catch is that the small business must include this $10,000 (or what ever amount was not required to bepaid back) in future income for taxation purposes.
Where Can I Apply For the CEBA?
You must apply for the CEBA through your bank and they will fund it based on the governmentâ€™s guarantee. This loan can only be applied for online and you must have registered for online banking with your applicable bank.
What is the Required Documentation Needed to Receive the CEBA?
For the time being all you need is your 2019 T4 summary showing your payroll for that year. In addition, as the CEBA is being given by your bank you must have an active business account with your bank that was in place on or before March 1, 2020.
How Long Do I Have to Wait to Get the CEBA Funds?
The government understands that Canadian businesses are suffering form the virus shut down and that many businesses are operating at reduces capacity or shut down all together. They understand that business bills must be paid and are working as quickly as possible to get the much needed funds into the small business ownerâ€™s hands.
It is expected that after the program has been finalized and the banks have their systems in place that the funds from the CEBA should be available within seven days of a successfully completed application. As a requirement of the CEBA is that you have registered for online banking, the funds when they become available will be accessible through regular online banking.
Frequently Asked Questions
Can a Sole Proprietor Apply for the CEBA?
No, you need a non personal business registered with your bank to qualify for the CEBA. There are other government programs that may assist sole proprietors, such as the Canada Emergency Response Benefit (CERB). This program assists Canadians who have lost their incomes due to the COVID-19 pandemic and are unable to apply for EI benefits. This program pays up to $2,000 a month. To qualify, your income for 2019 must have been at least $5,000, or in the preceding 12 months from when you apply.
Can Someone With a Personal Chequing Account Apply for the CEBA?
No, you must have a business account with a bank that was in place on or before March 1, 2020.
If I Own More Than One Business Can I Apply for Each One Separately?
Yes, but each business must qualify for the CEBA on its own and not in combination with any other business.
My Business Has Several Bank Accounts With Different Banks, Can I Apply to Each Bank for The CEBA?
No, only one CEBA loan can be received by an individual small business. It is advisable to apply through the bank that you do most of your banking and that you feel the most comfortable with.
If My Business Has Multiple Owners, How Do We Handle the Application?
Only one signature is permitted when applying for the CEBA. The small business must choose who will be signing and this person must have the authority to bind the business legally.
What Other Financial Assistance is Available from the Government for Businesses?
The government is working as hard as possible to assist Canadians in this time of need. Input is being received from individuals, businesses, business support groups and many others to direct the government in the right direction. Although the situation is currently fluid, the government has a few other programs it is hoping to launch as soon as possible.
One such program is the Business Credit Availability Program (BCAP). This program was put in place by the government to assist businesses that are suffering due to the current economic crisis caused by COVID-19. The government will provide up to $65 billion in total loans and other financial assistance at current market rates. Business wishing to access these funds must have a viable business plan and demonstrate that they are unable to obtain the capital they need through other avenues.
Another program is Canada Emergency Wage Subsidy (CEWS)Â to support employers that are hardest hit by the pandemic, and protect the jobs Canadians depend on. This program for small businesses assists with 75% of their employeeâ€™s salaries and wages, up to $847 per week. It is open for all employers who have experienced a drop in gross revenues of at least 15 per cent in March, and 30 per cent in April and May 2020, compared to the same period in 2019. This program will be in place for a 12-week period, stretching form from March 15 to June 6, 2020.
There are also private finance companies out there that can help too. At times like this these companies will assist in the most positive ways by giving payment relieve for several months. If you are short on funds, but have collateral that can be pledged, it is an easy option to try borrowing for your immediate needs. One of Ontarioâ€™s longest established finance companies, Fast Action Finance is an obvious choice. Loans from Fast Action Finance can be done online thereby allowing you to practice social distancing and keeping safe.
Stay Strong, We are All In This Together
Times are very tough for all businesses now. Regular Canadians have invested time and money into their businesses and dreams, and these are now at risk. The federal government has stepped up to assist and now it is our turn to do our part. All Canadians must practice social distancing and stay indoors whenever possible so we can defeat this virus and flatten the curve. One we do this we can return to normal life and restart our businesses and fulfill our dreams.
Learn more aboutÂ Canada Emergency Response Benefit â€“ CERB,Â Business Credit Availability Program â€“ BCAP, andÂ Canada Emergency Wage Subsidy – CEWS on Canada.ca