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The Canada Emergency Business Account (CEBA) is an initiative of the Government of Canada.  The official Government website is

What Happens If I Can’t Pay Back CEBA?

What Happens If I Can't Pay Back CEBA?
Reading Time: 7 minutes

Navigating the waters of financial uncertainty can be a difficult task, especially when it surrounds something as significant as the Canada Emergency Business Account (CEBA). Many entrepreneurs and small business owners ask, “What happens if I can’t pay back CEBA?” If you are in this boat, you are not alone. Let’s dig into this topic, shedding light on the possibilities and guiding you toward the best course of action. We will also explore the different options available to you in this situation.

CEBA Loan Overview

CEBA loan overview

The Canada Emergency Business Account (CEBA) program is a financial lifeline designed to assist small businesses and not-for-profit organizations in these challenging times. The program offers interest-free loans of up to $60,000, offering a much-needed cash boost to businesses struggling with the financial fallout of the pandemic.

What makes this program especially attractive is the potential for loan forgiveness. If you, as a CEBA borrower, are able to repay the balance of your loan on or before December 31, 2023, the program offers loan forgiveness of up to 33 percent. This means that up to $20,000 of the loan could be completely forgiven, significantly reducing the financial burden on your organization

Remember that to benefit from this forgiveness, you need to be in good standing with your lender throughout the loan period. This forgiveness policy provides an extra incentive to plan your finances and repayments strategically, ensuring you can take advantage of the generous terms offered by the CEBA program.

Understanding CEBA Loan Repayment Provisions

Can't Pay Back CEBA?

The Canada Emergency Business Account (CEBA) loan repayment provisions have been thoughtfully crafted to encourage prudent borrowing and timely repayment among businesses. A crucial component of these provisions is the loan forgiveness feature. According to this, if a business manages to repay $40,000 of the total loan balance by December 31, 2023, the remaining $20,000 will be completely forgiven.

This significant aspect of the CEBA loan not only alleviates some of the financial burdens that businesses might be grappling with but also serves as a strong incentive for businesses to manage their finances effectively and repay their loan in a timely manner. By doing so, businesses can save up to a third of the total loan amount, that is $20,000, which otherwise would have been an additional repayment pressure.

If a business fails to meet the deadline for repaying the CEBA loan, the remaining balance will undergo conversion into a two-year term loan. This conversion isn’t a trivial matter and comes with certain financial implications. Specifically, an interest rate of 5% per annum will be applied starting from January 1, 2024. These terms are not arbitrary but are rather set by the Government of Canada, implying they aren’t open to negotiation through any other avenues.

That said, businesses do have some breathing space before they are required to commence payments. No principal or interest payments are demanded on the loan until January 1, 2024. This provision grants businesses essentially a one-year grace period to regroup, re-strategize, and revive their financial situation.

However, once we cross over into 2024, the rules change. Interest becomes due on a monthly basis, which businesses need to be mindful of to avoid penalties. As for the principal sum, which for the majority of companies will be either $40,000 or $60,000, it is due on or before December 31, 2025. Although there is a significant time window for repayment, it is advisable to plan in advance to meet this obligation without undue financial stress.

What Happens If I Can’t Pay Back CEBA?

What Happens If I Can't Pay Back CEBA?

So, what happens if you can’t pay back CEBA? Well, the CEBA loan agreement has explicitly outlined the terms and conditions for such a scenario. The CEBA is an interest-free loan until December 31, 2023, a feature aimed at mitigating the financial burden on struggling businesses. This means that you won’t be charged any interest if you manage to repay your loan by the said date, which makes for a smart financial move.

However, if you cannot repay the loan in its entirety by this deadline, the terms of the agreement change. Specifically, any principal amount that remains unpaid after December 31, 2023, will begin accruing interest. This interest won’t be just a nominal amount; it will be charged at a rate of 5% per annum.

This change implies that businesses that are unable to repay their loans within the interest-free period will face an additional financial burden in the form of interest charges. Therefore, businesses must strategize their finances and repayment plans with this deadline in mind, to avoid getting caught in the interest charges of 5%.

But what happens if you still owe money on your CEBA loan on January 1, 2024? If you find yourself in this position, it’s important to understand the financial responsibilities that come into play. From January 1, 2024, you are required to make monthly interest payments. These payments are calculated based on the outstanding balance of the loan and the annual interest rate, which is 5%.

Perhaps one of the most significant implications is that you won’t be eligible for any loan forgiveness. This means that the entire principal amount of the loan will need to be repaid. The deadline for this repayment is December 31, 2025.

However, it’s not all doom and gloom. The CEBA loan terms also offer some flexibility. You have the option to repay the remaining loan balance at any time without incurring penalties. This means that if you have the cash available, you can make payments in installments, or if you prefer, you can pay off the entire amount borrowed in one lump sum.

Consequences of Failing to Pay Back CEBA

Your financial institution, the one that processed the loan for you, has the responsibility of collecting repayments. Given the novelty of the Canada Emergency Business Account (CEBA), lenders are still defining their approach towards late payments and defaults. This is not your typical bank loan – it is a government-funded relief measure, implying that your financial institution won’t incur losses if you fail to repay.

However, it’s crucial to understand that the CEBA is still a loan, and repayment is not optional. The ramifications of non-repayment extend far beyond financial penalties. One immediate consequence could be a decline in your credit score. A lower credit score could make future borrowing for your business more challenging, and limit access to favorable interest rates.

Moreover, the stress of an unpaid loan might not only impact your health but could also disrupt the smooth functioning of your business. The stress can be a distraction, pulling your attention away from essential day-to-day operations and strategic decision-making.

So, while the CEBA provides a financial lifeline during challenging times, it’s vital to approach this assistance responsibly. Plan your finances well, envisioning future repayment, to ensure that this short-term relief doesn’t morph into a long-term financial burden.


The Canada Emergency Business Account (CEBA) is a government-funded relief measure that provides businesses with much-needed financial assistance during the COVID-19 pandemic. However, it’s important to understand that this loan must be repaid by December 31, 2023 – or converted to an interest-bearing term loan thereafter. Planning ahead and having a clear repayment strategy is important to avoid any unnecessary financial burden. Failing to repay the loan could result in penalties, such as an increase in interest charges or a decline in credit score, which would impede access to further financing and negatively impact future growth prospects.

Frequently Asked Questions

What is the repayment deadline for the principal amount of the CEBA loan?

The principal amount of the CEBA loan is due on or before December 31, 2025. Businesses are advised to devise a repayment strategy well in advance to avoid financial stress.

What happens if I can’t pay back CEBA loan by the interest-free deadline?

If you can’t repay your CEBA loan by December 31, 2023, the remaining principal amount will start accruing interest at a rate of 5% per annum. Monthly interest payments will be required from January 1, 2024.

What are the consequences of not repaying the CEBA loan?

Failure to repay the CEBA loan can decrease your credit score, making future borrowing more challenging. It can also create significant stress, potentially impacting your health and business operations.

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