CEBA Loan Repayment: What You Need to Know -

If you’re a Canadian business owner who received a Canada Emergency Business Account (CEBA) loan during the pandemic, you may be wondering about the repayment terms after the September 14th, 2023 announcement.

In this update we provide information on how to pay back your CEBA loan, and answer questions on what to do if you can’t pay back CEBA.

Key Takeaways

The repayment deadline for CEBA loans has been extended to January 18, 2024
If you submit a refinancing application with your bank by January 18, 2024, you will have until March 28, 2024 to confirm refinancing
If you are unable to repay the loan by January 18, 2024, the loan will convert to a three-year term loan on January 19 with an interest rate of 5% per annum, and the loan will be fully due by December 31, 2026
CEBA lenders have said that they are willing to work with borrowers to

What is CEBA?

CEBA (Canada Emergency Business Account) provided interest-free loans of up to $60,000 to eligible small businesses and not-for-profit organizations. The loan was designed to help businesses cover their operating costs during the pandemic, such as rent, utilities, and wages.

When is CEBA Loan Repayment Due?

The repayment deadline for the CEBA loan has been extended to January 18, 2024, to provide financial relief to small businesses affected by the COVID-19 pandemic.

However, if you are unable to repay your loan by January 18, 2024, you may still be eligible for partial loan forgiveness. If you make a refinancing application with the financial institution that provided your CEBA loan by January 18, 2024, you can extend the repayment deadline to March 28, 2024, and still qualify for partial loan forgiveness.

The amount of loan forgiveness you can receive depends on the size of your loan

If you received a $40,000 loan, you can receive up to $10,000 in loan forgiveness if you repay the loan by January 18, 2024
If you received a $60,000 loan, you can receive up to $20,000 in loan forgiveness if you repay the loan by January 18, 2024

It is important to note that if you are unable to repay your loan by the repayment deadline, you will be required to repay the full amount of the loan. Outstanding loans will be converted to three-year term loans with an interest rate of 5% per annum commencing on January 19th, 2024, with the loans fully due by December 31, 2026.

If you have any questions or concerns about the CEBA loan repayment, it is recommended that you contact the financial institution that provided your loan for more information.

How Much of the $60,000 CEBA Loan is Forgivable?

If you received a $60,000 loan through the Canada Emergency Business Account (CEBA) program, the good news is that up to 33% of the loan amount ($20,000) is forgivable if you pay the loan back by the new deadline of January 18, 2024.

The forgivable portion of the CEBA loan is calculated as follows:

Loan Amount	Forgivable Amount
Up to $40,000	Up to $10,000 (25% of loan)
Above $40,000 and up to $60,000	Up to $20,000 (25% on the first $40,000 + 50% on the amount above $40,000 and up to $60,000)

Source: CEBA FAQs

It’s important to note that if you do not repay the loan on time (by January 18, 2024), the entire loan amount will become due and payable by December 31st, 2026.

How Do I Qualify for CEBA Loan Forgiveness?

Here’s what you need to know to qualify for CEBA loan forgiveness:

Repayment Deadline

The repayment deadline for CEBA loans to qualify for partial loan forgiveness of up to 33% has been extended to January 18, 2024, from the previous deadline of December 31, 2023. This extension recognizes that the end of December is a busy time for many Canadian businesses. If you repay the balance of the loan on or before January 18, 2024, you may be eligible for loan forgiveness of up to 33 percent.

Eligibility Criteria

To be eligible for CEBA loan forgiveness, you must meet the following criteria:

Loan holders that met CEBA eligibility criteria and are in good standing are eligible for the January 18, 2024 repayment deadline to qualify for partial loan forgiveness
Loan holders that were contacted by their financial institution in late 2022 informing them that they qualify for a repayment deadline of December 31, 2023 to qualify for partial loan forgiveness will now benefit from an extended repayment deadline of January 18, 2024 to qualify for partial loan forgiveness
Other loan holders will be contacted in the coming months by their financial institution to confirm their eligibility for the January 18, 2024 repayment deadline to qualify for partial loan forgiveness
If you have submitted a refinancing loan application to the financial institution that provided your CEBA loan by January 18, 2024 but require a grace period in order to finalize the payout of your CEBA loan, you can still qualify for partial loan forgiveness if the outstanding principal of your CEBA loan, other than the amount of potential debt forgiveness, plus any applicable interest is repaid by March 28, 2024

Additional Information

If you are unable to pay back the CEBA loan by January 18, 2024, your loan will be converted into a three-year term loan at 5 percent interest, and you will have to pay the full amount of your loan by December 31, 2026.
If you have any questions about CEBA loan forgiveness, you can contact the CEBA Call Centre at 1-888-324-4201. The CEBA Call Centre is available Monday to Friday from 9AM to 6PM Eastern Standard Time, excluding statutory holidays.
For more information on CEBA eligibility and how to apply for a CEBA loan, visit the CEBA website.

What are the Repayment Terms for the $40,000 and $60,000 CEBA Loans?

The CEBA program offered interest-free loans of up to $60,000 to small businesses and not-for-profits affected by the COVID-19 pandemic. Here’s what you need to know about repaying your CEBA loan:

Repayment Terms for $40,000 CEBA Loans

If you received a $40,000 CEBA loan, you have until January 18, 2024, to repay the full amount. If you are unable to pay back the loan by January 18, your CEBA loan will be converted into a three-year term loan at 5% interest, and you will have to pay the full amount of your loan by December 31, 2026.

However, if you apply for refinancing from the bank that provided your CEBA loan and are unable to complete refinancing by January 18, 2024, you may be eligible for an extension of the repayment deadline to March 28, 2024 as long as you’ve submitted a refinancing application to your financial institution by January 18, 2024.

Repayment Terms for $60,000 CEBA Loans

If you received a $60,000 CEBA loan, you may be eligible for loan forgiveness of up to 33% (up to $20,000) if you repay the balance of the loan on or before January 18, 2024. This means that you would only need to repay $40,000 of your CEBA loan.

If you are unable to pay back the loan by January 18, 2024, your CEBA loan will be converted into a three-year term loan at 5% interest, and you will have to pay the full amount of your loan. There will be no forgivable portion if the CEBA loan is repaid after January 18, 2024 (unless you are in the process of refinancing the loan with your financial institution, in which case you have until March 28, 2024).

It’s important to note that if you have multiple CEBA loans, you will need to repay each loan separately according to its repayment terms. Also, if you have any questions or concerns about your CEBA loan repayment, you should contact your financial institution or the CEBA call centre at 1-888-324-4201.

How to Pay Back CEBA Loan

If you received a CEBA loan, you will need to repay it by January 18th, 2024, to qualify for loan forgiveness. Here are the steps you can take to pay back your CEBA loan at the top five Canadian banks:

How to Pay Back CEBA Loan: BMO

If you have a CEBA loan through BMO, you can make your BMO CEBA repayment through online banking or by visiting a branch. To make a payment online, log in to your BMO account and follow these steps:

Click on the “Payments & Transfers” tab
Select “Pay Bills”
Choose “Add a Payee”
Search for “CEBA” and select “Canada Emergency Business Account”
Enter your CEBA loan account number and the payment amount
Confirm the payment details and submit

How to Pay Back CEBA Loan: TD

If you have a CEBA loan through TD, you can make a payment through online banking or by visiting a branch. To make a payment online, log in to your TD account and follow these steps:

Click on the “Pay Bills” tab
Select “Add a Payee”
Search for “CEBA” and select “Canada Emergency Business Account”
Enter your CEBA loan account number and the payment amount
Confirm the payment details and submit

How to Pay Back CEBA Loan: Scotiabank

If you have a CEBA loan through Scotiabank, you can make a payment through online banking or by visiting a branch.

To make a payment online, log in to your Scotiabank account and make a bill payment to the ScotiaLine for business VISA that was set-up as your CEBA.

How to Pay Back CEBA Loan: CIBC

If you have a CEBA loan through CIBC, you can make a payment through online banking or by visiting a branch. To make a payment online, log in to your CIBC account and follow these steps:

Click on the “Pay Bills & Transfer Funds” tab
Select “Add a Payee”
Search for “CEBA” and select “Canada Emergency Business Account”
Enter your CEBA loan account number and the payment amount
Confirm the payment details and submit

How to Pay Back CEBA Loan: RBC

If you have a CEBA loan through RBC, you can make a payment through online banking or by visiting a branch.

Payments to your CEBA loan can be made at any time through the RBC mobile app or online banking for business. Follow the instructions on how to transfer funds from your RBC business bank account to your CEBA loan.

What Happens If I Can’t Pay Back CEBA?

If you are unable to pay back your CEBA loan, here are some potential consequences:

Loss of Forgiveness Eligibility: If you are unable to repay the balance of your CEBA loan by January 18, 2024, you will lose eligibility for loan forgiveness of up to 33%. This means that you will be responsible for repaying the entire loan amount, plus interest.
Interest Charges: If you are unable to repay the full amount of your CEBA loan by the deadline, you will begin to accrue interest at a rate of 5% per annum. This interest will be charged on any outstanding balance until the loan is repaid in full.
Loan Conversion: If you are unable to repay your CEBA loan by January 18, 2024, the remaining balance will be converted into a 3-year term loan due on December 31, 2026. This means that you will have to make regular payments on the loan until it is fully repaid.

If you find yourself in a situation where you are unable to repay your CEBA loan, it is important to contact your lender as soon as possible to discuss your options. Your lender may be able to work with you to find a solution that works for both parties (see the “CEBA Loan Default” section below).

What Happens to CEBA Loan If a Business Closes?

If your business closes, you are still responsible for repaying the Canada Emergency Business Account (CEBA) loan. If the business is unable to repay the loan, it may be subject to legal action by the financial institution that provided the loan.

If your business is struggling to repay the CEBA loan, you may want to consider refinancing the loan with the financial institution that provided the loan. The repayment deadline to qualify for partial loan forgiveness has been extended to March 28, 2024, for CEBA loan holders who make a refinancing application with their financial institution by January 18, 2024. This extension may provide some relief for businesses that are struggling to repay the loan.

CEBA Loan Default – How to Avoid It

If you’re at your wit’s end about how to pay back the CEBA loan, we’ve got some suggestions for you.

Step #1: Approach Your Bank/Lender

Your first step should be to approach the bank/lender that provided your CEBA loan and find out if they have any products that would allow you to pay back your CEBA loan by the January 18, 2024 deadline.

We’ve grouped the products that your bank might be able to provide into four categories: short-term financing; loan & debt management; asset-based solutions; and credit solutions:

Short-Term Financing Solutions to Pay Back Your CEBA Loan

Overdraft Protection or Increase: Negotiate for a higher overdraft limit on your business account. This provides you with some liquidity buffer while the loan is repaid.
Business Line of Credit: This is a revolving fund you can tap into as needed. It offers more flexibility than a term loan. You can negotiate a line of credit to pay off your CEBA loan, then repay this line over a more extended period or with more feasible terms.
Bridge Loans: These are short-term loans designed to provide immediate cash flow until you secure a more permanent financing solution.
Merchant Cash Advance: Your bank may offer an advance based on future credit card sales, providing you with an immediate influx of cash to pay off the CEBA loan. (You also approach companies that specialize in merchant cash advances, such as OnDeck, Driven, and Merchant Growth)

Loan & Debt Management Ideas to Pay Back Your CEBA Loan

Term Loan: This has a set amount, interest rate, and repayment period. While you’d be essentially swapping one loan for another, the repayment terms or interest rate might be more beneficial for you, and you would get the big benefit of CEBA’s partial loan forgiveness.
Loan Consolidation: If you have multiple loans or debts, consider consolidating them into one loan, which could get you a single, potentially lower, interest rate. While this wouldn’t provide you with the funds to pay off your CEBA loan, you would get the obvious benefit of a lower payment if you were able to negotiate a lower interest rate.

Asset-Based Solutions to Pay Back Your CEBA Loan

Mortgage Refinancing: If you own real estate, consider refinancing it. With today’s (relatively) low-interest rates, you can leverage the equity from the property to repay the CEBA loan.
Asset-based Financing: This allows you to use your assets, such as accounts receivable, inventory, or equipment, as collateral to secure financing.
Sale and Leaseback Arrangement: This involves selling an asset, like property or equipment, to the bank and then leasing it back. The cash from the sale can be used to pay off your CEBA loan.

Credit Solutions to Pay Back Your CEBA Loan

Commercial Credit Cards: While not ideal because of potentially high interest rates, in a tight spot, you can use a credit card with a 0% introductory APR or one that offers reward benefits to offset some costs.
Secured Business Loans: Offer additional collateral to secure a new loan. Your bank might be more willing to lend at a lower rate if they have more security.
Trade Finance: If you’re involved in importing or exporting, trade finance can help manage your cash flows and can be used to secure short-term funding.

How to Negotiate CEBA Loan Alternatives with Your Bank

When approaching your bank, be prepared with:

An updated business plan showing your potential for growth and profitability
Your current financial statements and cash flow projections
A clear proposal indicating how the new financing product will benefit both your business and the bank in the long run

Building a strong relationship with your bank, maintaining open communication, and being proactive in understanding the available products can position you favourably for such negotiations.

Step #2: Consider These Other CEBA Loan Alternatives

If negotiating with your existing bank isn’t an option, there are other sources of funding that you can tap into. We call this the Business Funding Universe, and divide it into four categories of funding:

Self-Funding
Free Funding
Debt Financing
Equity Financing

Self-Funding to Pay Off Your CEBA Loan

While using your own funds to pay off your CEBA loan might not sound ideal, it might be worth it to obtain the CEBA partial loan forgiveness. Here are some ways to self-fund your loan payout:

Personal savings: While it’s always wise to have savings for a rainy day, allocating a part of them towards your CEBA loan now can bring you long-term benefits, especially with the potential for loan forgiveness on the horizon. Remember, it’s about striking a balance.

Retirement accounts: Tapping into retirement funds isn’t everyone’s cup of tea, but it’s worth weighing the benefits against the drawbacks. With potential tax implications, it’s advisable to get insights from a financial expert before taking this step.

Personal assets: Your assets can be powerful tools in this repayment journey.

By accessing home equity through a loan or line of credit, you can channel significant funds towards the CEBA loan.
Non-essential vehicles can be sold, or used as collateral for loans.
Jewelry and collectibles can be sold, or you can opt for a pawn loan. Do remember to get them evaluated first.
Think about liquidating underperforming investments to generate funds swiftly.
Some life insurance policies might allow borrowing or cashing out.
Rental property income or even the sale of a secondary property can offer substantial funds to help you achieve the 33% loan forgiveness.

3Fs (family, friends, fools): If you have understanding loved ones capable of extending financial help, this might be the time. A clear agreement is essential to keep personal and financial relations uncomplicated.

Side hustles: Many Canadians are exploring additional income sources, from freelance gigs to e-commerce. This extra influx can be pivotal in repaying your CEBA loan by January 18, 2024.

Free Funding to Pay Off Your CEBA Loan

Free funding includes funding sources such as government grants, tax credits, and more. While it requires effort to obtain these, the financial benefits can be substantial, especially when combined with the CEBA loan forgiveness opportunity. Let’s dive in:

Grants: There are many grant programs tailored for small businesses in Canada. These grants can serve as a lifeline, especially when you’re looking to offload the CEBA debt. Research local, provincial, and federal grant opportunities. It takes time to apply and qualify, but it’s essentially free money.

Wage subsidies: Leverage wage subsidy programs available in Canada. By offsetting a part of your payroll expenses, you can divert those savings to address your CEBA obligations.

Tax incentives: Take full advantage of tax incentives designed to encourage business growth and innovation. By minimizing your tax liability, you’ll have extra funds to channel towards debt repayment.

Rebates: Don’t underestimate the power of rebates. From energy-efficient upgrades to specific business purchases, rebates can result in significant savings over time.

Business competitions/contests: Canada hosts a plethora of business competitions and contests, often with cash prizes. Winning could give you the financial boost needed to tackle your CEBA loan head-on.

Incubators and accelerators: Joining an incubator or accelerator program not only gives your business a competitive edge but often comes with seed funding or resources that can ease financial burdens.

Crowdfunding (donations): Platforms like GoFundMe or Kickstarter allow businesses to raise money. Share your story, the challenges of the pandemic, and how clearing the CEBA loan will impact your business. You’d be surprised how willing communities are to support local businesses.

Sponsorships: Local businesses and major corporations alike sometimes offer sponsorships to smaller entities. Whether it’s through monetary support, provision of equipment, or even service-based sponsorship, this can be a valuable resource. Showcase how supporting your business also benefits the sponsor, either through positive PR, brand visibility, or even shared values.

Partnership programs: Larger corporations often initiate partnership programs to collaborate with smaller businesses, particularly those that align with their brand or mission. This could translate into financial support, mentorship, or resources that could indirectly help you offset costs and channel funds towards your loan repayment.

Community or local support programs: Communities rally around their local businesses, especially during challenging times. Seek out in-kind support, such as reduced rent in community-owned spaces, access to local resources, or even direct financial assistance. Emphasize the value your business brings to the community and how their support will ensure you continue to serve and uplift the local economy.

Debt Financing to Pay Off Your CEBA Loan

This financing involves taking on various types of loans or credit products. When it comes to tackling your CEBA loan, debt financing offers various avenues, each with its unique benefits and considerations:

Loans: Traditional bank loans or microloans can provide you with the necessary funds to repay your CEBA debt. However, be cautious—while it’s tempting, replacing one debt with another requires a clear understanding of the terms and interest rates to ensure you’re not digging a deeper financial hole.

Lines of credit: A business line of credit gives you flexible access to funds only when you need them, often with lower interest rates than credit cards. This can be an excellent way to manage unexpected costs while channeling profits towards loan repayments.

Credit Cards: While not the most cost-effective method due to higher interest rates, credit cards can offer short-term solutions, especially if you’re awaiting payments from clients. Consider cards with cashback or rewards that benefit your business.

Equipment financing: If you need to purchase or replace equipment, consider equipment financing. It allows you to pay for the machinery over time, freeing up immediate funds for loan repayments.

Merchant cash advance: Businesses with consistent daily credit card sales can access a lump sum in exchange for a portion of future sales. This can quickly provide funds to repay the CEBA loan, but be aware of associated fees and percentages.

Purchase order financing: If you have large purchase orders but lack the funds to fulfill them, this financing option pays your suppliers directly. Once you fulfill the order and receive payment, you repay the finance company, potentially keeping part of the profit for loan payments.

Invoice factoring & financing: Both these methods involve leveraging unpaid invoices. Factoring involves selling your invoices to a third party at a discount, while financing uses them as collateral for a loan. This can infuse your business with immediate funds.

SR&ED financing: For businesses involved in research and development in Canada, the Scientific Research & Experimental Development (SR&ED) tax incentive can be financed. This turns future tax credits into immediate cash.

Crowdfunding (loan/debt): Platforms like Kickstarter or Indiegogo allow you to raise money in exchange for future products, equity, or even as a loan. This can be a way to engage your community while generating funds.

Trade credit: Negotiating better terms with suppliers, such as extended payment periods, can free up your cash flow. This can be channeled towards CEBA loan repayments, especially if you have a good relationship and track record with suppliers.

Convertible debt: A short-term loan that can convert into equity, often used by startups to attract investors. If you’re considering raising funds, this could be an option that allows you to repay your CEBA loan and provide potential investors with an incentive.

Equity Financing to Pay Off Your CEBA Loan

Tapping into equity financing methods can be a strategic move to generate funds. By giving up a portion of ownership or equity in your business, you can acquire the needed capital to repay your CEBA loan timely and benefit from the partial loan forgiveness.

Incubators: Business incubators support startups and early-stage companies by offering resources, mentorship, office space, and sometimes, financial backing. By joining an incubator, you could secure the funds you need while also getting guidance to strengthen your business model.

Accelerators: Much like incubators, accelerators offer funding in exchange for equity. The difference lies in the intensity and duration—accelerators run on a set timeframe, pushing rapid growth and culminating in a “demo day” to attract further investment.

Angel investment: Individual investors or groups with surplus cash looking to invest in promising startups or businesses. In exchange for their capital, they’ll require equity. Finding the right angel investor can also bring valuable management experience and contacts.

Venture capital: Venture capitalists are professional groups that manage pooled funds from many investors to invest in startups and small businesses. They come in when you have a proven business model and are looking to scale, offering larger sums of money than most other sources.

Crowdfunding (equity): Canadian crowdfunding platforms allow businesses to raise small amounts of money from many investors in exchange for equity. This method not only provides capital but also validates your business idea as investors show their trust in your vision.

Strategic partnerships: Forming an alliance with another company can lead to capital injection. This is not just about money; the right partner can offer resources, distribution channels, or technology that can elevate your business.

Private share placement: Directly selling shares of your company to private investors, like institutional investors. It’s a way of raising capital without going public, thus avoiding the regulatory standards of a public offering.

Mezzanine financing: A hybrid of debt and equity financing, mezzanine financing allows lenders to convert their loan into an equity interest if the loan isn’t paid back in time and in full.

Family offices: High net-worth families set up these private offices to manage their wealth and investments. They’re always looking for diversification, and investing in businesses is one avenue. Presenting a promising opportunity can lead to substantial funding.

FAQs About the CEBA Repayment

CEBA, or the Canadian Emergency Business Account, is a loan program designed to support small businesses and not-for-profit organizations that have been adversely affected by the COVID-19 pandemic. Here are some frequently asked questions about the CEBA repayment:

What Does CEBA Stand For?

CEBA stands for the Canada Emergency Business Account. It was a loan program designed to support small businesses and not-for-profit organizations that have been adversely affected by the COVID-19 pandemic.

When Did the CEBA Loan Start?

The CEBA loan program was launched in April 2020 to help small businesses and not-for-profit organizations affected by the COVID-19 pandemic.

Who was Eligible for the CEBA Loan?

To be eligible for the CEBA loan, applicants had to meet certain criteria, including having an active CRA Business Number (BN) and having an active business chequing or operating account with a participating financial institution.

Is the CEBA Loan Program Application Ongoing?

The CEBA loan program application is no longer available for new applicants.

Will CEBA Be Extended Again?

There is currently no information about whether the CEBA loan program will be extended again. However, the government has previously extended the repayment and partial loan forgiveness deadlines for CEBA borrowers.

What is Taxable in CEBA?

The CEBA loan program provided interest-free loans to eligible small businesses and not-for-profit organizations. The loan amount is not taxable, but any loan forgiveness amount received under the program is considered taxable income.