Feds roll out interest-free loan program for business

Does your small business qualify?

On April 16, 2020, the federal government announced that the payroll threshold for businesses qualifying for the Canada Emergency Benefit Account (CEBA) has been reduced to $20,000 from $50,000 and increased at the upper end to $1.5 million from $1 million. Additional commercial rent relief measures to help small- and medium enterprises (SMEs) will be introduced soon. Here are the details you need to know now:

What is the CEBA?

Businesses and non-profits can qualify to receive an interest-free loan of up to $40,000 if their revenues have been reduced due to COVID-19. There are no specific criteria on how much your revenues have to decrease to qualify for this program.

Furthermore, 25% of this – up to $10,000 – will be forgiven if the loan is repaid by December 31, 2022. It’s a $25 billion program offered through financial institutions in cooperation with Export Development Canada (EDC).

How to get the CEBA:

Loan candidates will need to apply to their financial institution and meet four basic criteria to qualify.

The business. Yours is a Canadian operating business in operation as of March 1, 2020, with a federal tax registration and you intend to continue to operate this business or resume its operations.
The payroll. You paid total employment income between $20,000 and $1,500,000 in the 2019 calendar year.
The relationship with the financial institution. You have an active business chequing/operating account with the Lender, your primary financial institution, having been opened on or prior to March 1, 2020. You must not be in arrears on existing borrowing facilities with this lender by 90 days or more as at March 1, 2020, and will not have previously used this program or applied for support under this program with any other financial institution.
Follow-up. You must agree to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

What should the money be used for?

You must use the money to pay for non-deferrable operating expenses like payroll, rent, utilities, insurance, and property taxes and/or regularly scheduled debt servicing. You cannot use it to prepay or refinance existing debt, pay dividends, distributions, and increases in management compensation. Be sure you can back that up in an audit trail.

Who is not eligible?

You won’t qualify if you are a government organization or body, or entity owned by either. Neither will a union, charitable, religious or fraternal organization registered or owned by one, or if so, it is a registered T2 or T3010 corporation generating some revenue from the sale of goods or services.

Yours cannot be an entity owned by anyone holding political office, nor can your business promote violence, incite hatred, or discriminate on the basis of sex, gender, sexual orientation, race, ethnicity, religion, education, age, or mental or physical disability.

Check Knowledge Bureau for updates and breaking news on federal tax and income support changes.

Evelyn Jacks is an award-winning financial educator, best-selling author, tax expert, and founder of Knowledge Bureau™, a widely respected financial education institute and publisher which has welcomed thousands of students from the various financial services to its online and in-class programs. Follow Evelyn Jacks on Twitter @EvelynJacks. Visit her blog at www.evelynjacks.com.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

Check these Fund Library articles for more information on government emergency relief programs for individuals and businesses.

Federal government’s anti-virus financial measures

More revisions to the emergency wage subsidy program

Some clarity on the emergency wage subsidy program

How to get the Canada Emergency Response Benefit