Pharmacies are an essential part of our daily lives. Pharmacies are always in demand and remain stable throughout economic changes. However, due to the crisis, pharmacies have faced financial instability. That’s when CEBA loans came into action.
This blog covers everything about CEBA loan for pharmacies. We will discuss the purpose of CEBA loans for pharmacies and the current status of CEBA loans for pharmacies.
CEBA Loan for Pharmacies
The Canada Emergency Business Account (CEBA) was launched on April 9, 2020. Since then, it has been a financial lifeline for many businesses, including pharmacies. The aim was to help pharmacies struggling due to the COVID-19 pandemic.
This program has significantly contributed to the economy, with an impressive $49 billion. Approximately 900,000 businesses, primarily small ones, benefitted from this initiative to cope with the pandemic fallout.
The CEBA loan was designed to help businesses like pharmacies manage their non-deferrable costs. These costs continue to accumulate regardless of economic slowdown and include expenses like rent, utilities, pharmacies, taxes, and employment costs.
Initially, the scheme offered a zero-interest loan of $40,000 to eligible pharmacies. Later, this amount was increased up to $60,000, with a portion forgivable if specific conditions were met. For countless pharmacies, CEBA served as a financial cushion, facilitating business operations in the post-COVID era.
Revised Deadlines for Partial Loan Forgiveness & Repayment
On September 14, 2023, the Prime Minister rolled out updated deadlines for repaying CEBA loans, including those held by pharmacies. This extension provided an additional year for loan holders to repay while also offering increased flexibilities for those wishing to qualify for partial loan forgiveness, which could be up to 33%.
CEBA Partial Loan Forgiveness Deadline
Specifically, pharmacies now have until January 18, 2024, to repay their CEBA loans. This deadline is an extension from the original date of December 31, 2023. Those pharmacies looking to refinance their loans must apply to their financial institution by January 18, 2024. Successful refinancing applications secure an extension until March 28, 2024, to qualify for loan forgiveness.
The government has introduced incentives for timely repayment. Suppose pharmacy sectors repay their loan by January 18, 2024, or before the refinancing extension deadline of March 28, 2024 (providing a refinancing application was submitted before January 18, 2024). In that case, it will qualify for partial loan forgiveness. This equates to $10,000 discounted from a $40,000 loan and $20,000 from a $60,000 loan, lightening the load for pharmacies.
However, pharmacy sectors that don’t repay by the loan forgiveness deadline will face repercussions. Starting January 19, 2024, any outstanding CEBA loan balance will be converted into a three-year term loan, forfeiting the zero-interest benefit. Instead, a 5% annual interest rate will be levied on the remaining balance, increasing the financial obligations.
CEBA Loan Repayment Final Deadline
The final cutoff for repaying all outstanding CEBA loans, along with applicable interest, is December 31, 2026. This deadline applies to all pharmacies, with no exceptions. Previously, the deadline was December 31, 2025. All pharmacy sectors have an additional year to complete repayment without any penalties.
The term loans, including those held by pharmacies, are subject to an annual interest rate of 5 percent. This interest rate applies to the remaining balance of the CEBA loans. The frequency of interest payments, however, may not be the same for all pharmacies as it can vary depending on the financial institution.
What if pharmacy Sectors Miss the CEBA Loan Repayment Deadline?
If pharmacy sectors do not repay their CEBA loans by the ultimate deadline, December 31, 2026, they will face a loan default. The Canada Revenue Agency (CRA) would then initiate collections. How assertively the CRA will act during collections remains uncertain.
Pharmacies sectors that have stayed up to date with monthly interest payments but have struggled to repay the principal might be able to negotiate a favourable repayment scheme. However, it would be advisable for these pharmacies’ services to secure an alternative lender before the final date, December 31, 2026. Doing so can save pharmacies from loan default, potential credit score implications, and related collection issues.
In the face of uncertainty, the CEBA loan has proven to be a financial buoy for pharmacies across Canada. From mitigating non-deferrable expenses to offering an opportunity for partial loan forgiveness, it has provided a versatile solution in challenging times.
As we navigate through the aftermath of the pandemic, it’s encouraging to see measures such as the CEBA loan supporting the resilience and continuity of essential services like pharmacies.
So, if your pharmacy sector is struggling due to the pandemic, explore the options provided by CEBA.