When the pandemic hit Canada in early 2020, businesses nationwide were forced to grapple with a changed landscape almost overnight. In response, the federal government announced the Canada Emergency Business Account (CEBA) in April 2020, which allowed businesses and not-for-profits to borrow up to $60,000 interest-free.
CEBA stopped providing new loans in June 2021, and the government offered partial loan forgiveness to businesses that took advantage of the program. Partial loan forgiveness required businesses to pay back the loans by a specific date, and on September 30, 2023, that deadline was extended.
Here are the new CEBA loan forgiveness and repayment deadlines and what you need to know now if you’re a borrower.
- If you applied for partial loan forgiveness, the deadline to repay your loan in full (minus the forgiven portion) is March 28, 2024.
- CEBA loan forgiveness does come with tax consequences. The forgiven portion of your loan is considered taxable and will need to be declared when you file your taxes.
- Any outstanding loans after January 18, 2024, will be subject to 5% interest.
When is my CEBA loan repayment deadline?
The due dates for CEBA loan repayments are approaching fast. It’s important that you follow the terms below by the dates noted so you don’t miss out on the chance to receive partial loan forgiveness.
- March 28, 2024: If you apply to refinance your loan before January 18, 2024, but still need time to finalize the repayment of your loan, this is the deadline to repay your loan in full (minus the forgiven portion) and qualify for partial loan forgiveness.
- December 31, 2026: This is the final CEBA loan due date. You’ll need to pay back your loan, plus 5% annual interest, by this date.
Am I eligible for CEBA loan forgiveness?
If you have a CEBA loan, meet the eligibility criteria, and your loan is in good standing, then you should be eligible for loan forgiveness.
If you qualify, the financial institution where you hold your loan should have contacted you in late 2022 to let you know.
Initially, you may have been told that the deadline to repay the loan and qualify for partial forgiveness was December 31, 2023, but that deadline has been extended to January 18, 2024.
So if you apply to refinance your CEBA loan through the original financial institution that provided it on or before January 18, 2024, you could still qualify.
How much is partial loan forgiveness?
The dollar amount of loan forgiveness you’ll qualify for depends on the size of your loan, but you can expect up to 33% loan forgiveness to a maximum of $20,000.
Here’s how to calculate how much of your loan will be forgiven. If you’re a business owner who borrowed $40,000 or less, you may be eligible for forgiveness up to 25% of your loan amount. For a $40,000 loan, this would equal $10,000 ($40,000 x 0.25 = $10,000).
The formula is slightly more complicated if you borrowed between $40,000 and $60,000. In this case, you’d be eligible for forgiveness of 25% on the first $40,000, and 50% on amounts between $40,000 and $60,000.
So, for example, if you borrowed $60,000, here’s how you’d calculate your potential loan forgiveness:
$40,000 x 0.25 = $10,000
$20,000 x 0.50 = $10,000
This calculation results in a total forgiveness amount of $20,000 on your $60,000 CEBA loan ($10,000 + $10,000 = $20,000). That means you must pay back $40,000 by January 18, 2024 ($60,000 – $20,000 = $40,000).
What are the CEBA loan repayment terms?
All CEBA loans are interest-free. After the due date of January 18, 2024, however, if you still have an outstanding loan balance, it will convert to a term loan, and you’ll pay 5% per annum in interest.
Going forward, that means you’ll need to make regular monthly payments, and you’ll need to pay the entire outstanding balance by December 31, 2026.
Wondering how to pay back your CEBA loan?
Your CEBA loan is held with a financial institution, and you’ll repay your loan directly to your lender. Contact your financial institution to arrange payment. The Canada Revenue Agency (CRA) also has additional information.
What should you do if you can’t repay your CEBA loan?
If your business hasn’t recovered from the pandemic yet, you’re not alone. Rising inflation and increased borrowing costs have put pressure on many companies, making it challenging to pay back CEBA loans.
If you can’t repay your CEBA loan, contact your financial institution as soon as possible. Defaulting on your loan can have financial consequences, like lowering your credit score, causing you or your business to incur fees and penalties, or, in some cases, your lender may even seize the asset you used to secure the loan. So if you think you might default on your loan, discuss your options with your lender. You may need to secure a new loan with a new lender, and this loan might have a higher interest rate but a longer repayment period, making it more affordable from month to month. Alternatively, you could dispose of assets to free up capital to pay the loan.
No matter what you choose, being proactive is crucial in order to prevent your loan from defaulting.
Will CEBA loan forgiveness impact my taxes?
CEBA loan forgiveness does come with tax consequences. The forgiven portion of your loan is considered taxable and will need to be declared when you file your taxes.
For example, if you receive $10,000 in loan forgiveness, you’ll need to declare that $10,000 as income on your taxes.
Steps to take today if you have a CEBA loan
If you have a CEBA loan and are not sure whether you’re eligible for loan forgiveness, contact the financial institution holding your loan. You may be able to check your loan’s status in your online portal, or you can speak to a small business advisor at your financial institution.
Be mindful of the dates above, and if you can’t afford to repay your CEBA loan, figure out an alternative plan as soon as possible. For more FAQs, see the CRA website.
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