2023 CEBA Repayment
CEBA Loan Repayment
CEBA, Canada Emergency Business Account program assisted tens of thousands of BC businesses stay afloat, as a temporary support measure during the Covid-19 pandemic. The federal government guaranteed interest-free loans up to $60,000 and late in 2022 extended the interest-free timeline for repayment to Dec 31 2023.
CEBA Loan Repayment and Loan Forgiveness Terms
Under the CEBA program, the loans, administered by your bank, are interest-free until Dec. 31st 2023. In conjunction with that 0% loan interest benefit, the program devised a very compelling incentive to repay the loans on-time, and in full. Creating a ‘forgiveness’ portion of each loan, which initially appears to be free money, should you repay the entire balance by the deadline Dec 31st, 2023.
The forgiveness amounts to up to 33% of the original loan amount received by the business.
However, it is important to note that the forgiveness amount is fully taxable and must reported on your 2023 tax return.
Here is how the forgiveness plan is designed, let’s say you received a $40,000 loan for your company. The government and your bank require you to repay $30,000 by Dec. 31 2023 and the remaining $10,000 will be forgiven, and the loan is considered fully repaid and closed by your bank. The $10k will be shown on your tax return by your accountant, and you will pay income tax related to the amount of forgiveness.
If your business received more than $40k in support, that loan forgiveness is a slightly more complicated calculation by CRA and your financial institution will have all the details related directly to your eligibility for forgiveness, amount owing and interest payment plan past 2023.
What NOT TO DO if you can’t repay your CEBA Loan.
Do not go out and borrow more money to pay off your CEBA loan!
Across Canada, the lending sharks are circling, with all the online quick and easy loan lead generation companies aggressively and specifically targeting CEBA business recipients. These replacement loans will include terms, conditions and unreasonably inflated interest rates, predatory lending rates, all the while they promote the forgiveness portion as a big savings for you and your business. Do not get fooled into refinancing with this quick, fast and not ineffective loan refinancing scheme.
What TO DO if you can’t repay your CEBA Loan
If you are feeling anxious and stressed and have no idea how to manage this impending repayment deadline, if you feel your business needs help, call us and speak to Sheila or Lisa. As Licensed Insolvency Trustees, we have years of experience in avoiding business failures and are very capable of business restructuring and recovery options.