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Federal Budget ->  COVID-19 Financial Relief  ->   Canada Emergency Business Account (CEBA)

Canada Emergency Business Account (CEBA)

CEBA was launched on April 9, 2020.  It provides government-guaranteed interest-free bank loans of up to $40,000 to small businesses and to not-for-profits that are operating businesses.  If the balance of the loan is repaid on or before December 31, 2022, this will result in 25% (up to $10,000) of the loan being forgiven.

Applications are online only and cannot be accessed by telephone or your branch.

Applications are accepted until October 31, 2020.  This change was announced on August 31st, the previously-set deadline.  Apparently work is being done to make the CEBA program available to those who have been unable to apply due to not operating from a business bank account.

The forgivable portion of the CEBA loan is taxable when received - see Tax Treatment and Accounting Treatment of Forgivable Loans such as CEBA and CECRA.

CEBA Application Hotline

Although all applications and approvals are handled by financial institutions, Export Development Canada has set up a CEBA call centre which may help you with any problems you're having with the status of your application.  The number is 1-888-324-4201.  The centre is open Monday to Friday from 8 am to 9 pm EST and will address the following types of questions:

 - What is the status of my application

 - Why was my application declined?

 - Why was my submitted document rejected?

However, our call regarding a couple of general issues not related to a particular application were not answered other than to say  that the criteria on the CEBA website are the correct criteria, not necessarily the documentation provided by the financial institution.

The CEBA Frequently Asked Questions (FAQ) have a list of the types of documents that are considered invalid as proof of 2020 Eligible Non-Deferrable Expenses.  This documentation is required for applications under the non-deferrable expenses stream.

Conflicting Information on CEBA Documentation

Some documentation provided under the payroll stream indicates that "The Borrower is a business that is a sole proprietorship, partnership or a Canadian-controlled private corporation ("CCPC") that was in operation in Canada on March 1, 2020."  This would exclude not-for-profit corporations, although the CEBA FAQ indicates that non-profit organizations, registered charities, unions, etc are excluded unless they are actively carrying on a business in Canada that earns revenue from the regular supply of property/goods or services.  It would also exclude cooperative corporations, which are not excluded according to the CEBA FAQ.

Other documentation under the payroll stream indicates that "The Borrower was a Canadian operating business in operation as of March 1, 2020."  This agrees with the CEBA FAQ.

See Payroll Stream below for conflicting information on payroll to non-arm's length parties.

CEBA Payroll Stream

The Payroll Stream applications are available through your bank, for businesses with payroll of $20,000 to $1,500,000. 

CEBA funds can be used to pay non-deferrable operating expenses including payroll.

Can payroll be to non-arm's length parties?  It depends on which documentation you look at.  Some documentation for payroll stream applications says "without limitation, payroll, ..." and other documentation says "wages and other employment expenses to independent (arm's length) third parties".  The CEBA FAQ at first did not say that payroll was limited to arm's length third parties.  It changed at some point (perhaps when the non-deferrable expenses stream started?), to say that eligible non-deferrable expenses did not include non-arm's length expenses.  We've tried accessing previous versions of the website using the Wayback Machine, but it seems unable to access the previous CEBA website versions.

Non-deferrable expenses also include rent, utilities, insurance, property tax and regularly scheduled debt service.  The funds cannot be used to fund prepayment/refinancing of existing debt, payments of dividends, distributions and increases in management compensation.

Non-Deferrable Expenses Stream - Opened June 26, 2020

On May 19, 2020 the government announced the expansion of the CEBA program to include sole proprietors, businesses that rely on contractors, and family-owned corporations that pay employees through dividends rather than payroll.

As with the CEBA payroll stream, this application is done online through your financial institution and cannot be accessed by telephone or your branch.

To qualify, applicants with payroll lower than $20,000 (Non-Deferrable Expenses Stream) per year would need:

 - a business operating account at a participating financial institution,

 - a CRA business number, and to have filed a 2018 or 2019 tax return, and

 - eligible non-deferrable expenses between $40,000 and $1.5 million in the 2020 calendar year.  This could include costs such as rent, property taxes, utilities and insurance.

The CEBA FAQ were updated on June 15th regarding applications under the expanded program, with further requirements for applications under the "Non-Deferrable Expenses Stream", including the submission of supporting documentation for 2020 eligible non-deferrable expenses.  The process for this type of applications was available starting June 26th.  The application process will take longer than the process for those done under the "Payroll Stream".  Funding will be received within 10-15 business days for approved applicants.

Video Tax News Additional CEBA FAQ information released.

Update June 30, 2020: CEBA FAQ now has information on exactly which non-deferrable expenses are eligible for the non-deferrable expenses stream, and what documentation must be provided to support these expenses.  See the Video Tax News article CEBA FAQ on document upload relased, which also links to the CEBA Upload Guide.

The May 19th press release also said that "the government will work on potential solutions to help business owners and entrepreneurs who operate through their personal bank account, as opposed to a business account, or have yet to file a tax return, such as newly created businesses".  Nothing more has been said on these topics.


Canada Emergency Business Account (CEBA)

Business Development Bank of Canada (BDC) Business Credit Availability Program (BCAP)

Revised: September 02, 2020

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