The January 18, 2024 CEBA repayment deadline has passed. Business owners who have repaid their loan now get to claim loan forgiveness of up to 33% — $20,000 out of a $60,000 loan. Congratulations!
The CEBA program was delivered during an unprecedented time. A global pandemic closed doors as Canadian businesses scrambled to keep up. The result was the CEBA program, possibly the largest bailout in Canadian history. Loans were quickly delivered, and just as quickly scooped up. Favourable loan terms (including the loan forgiveness provisions mentioned above) meant many business owners took the funds. Now the deadline for taking advantage of this bonus has passed. Now what?
Businesses looking for CEBA repayment now fall into one of three groups:
- Your business is active, but did not apply for bank refinancing
- Your business is no longer operating or insolvent
- Your business is active, and did apply for bank refinancing
For the first two groups, the CEBA loan forgiveness option isn’t on the table. If you missed the deadline and failed to apply for a CEBA extension, your business now owes the full $60,000 (or $40,000, if you took out a smaller loan). Interest, at 5% annually, started accruing on January 19. The outstanding balance of your loan was automatically converted into a three year term loan, with the full amount due by December 31, 2026.
Fall into this group? You have the option of continuing with the CEBA loan, refinancing the full $60,000 of funds, or defaulting on the loan. We’ve already gone into detail on why defaulting isn’t a good idea.
However, there is one group still able to claim the benefits. Business owners who applied for loan refinancing with their primary financial institution prior to this deadline – even if they didn’t get it – have until March 28, 2024 to come up with the funds. So what do they need to know?
Will the CEBA deadline be extended?
In short, no. The Government of Canada has extended the CEBA deadline twice already, and delayed making a decision on CEBA loans for most of 2023. In late 2022, the government extended the CEBA deadline from December 31, 2022 to December 31, 2023. Then, on September 14, 2023, they moved the deadline to March 28, 2024 for businesses who had applied for refinancing, and January 18, 2024 for businesses who had not.
This is despite pressure from lobbyists and interest groups, as well as a letter signed by premiers of every Canadian province. As of January 22, The Globe and Mail published that, the government estimates that nearly 75% of CEBA loans have been repaid, although this is a rough number.
If you applied for CEBA refinancing
Businesses who applied for refinancing with the bank or credit union that holds their CEBA loan before the deadline (and got declined) still have time. Important to note as well, if you applied for a refinancing loan with your financial institution and got approved, you don’t have to take their loan to qualify for an extension. With the additional time, you’re free to shop around for a loan with better terms — or at least more flexible ones.
The key consideration for your business at this time should be cash flow. Cash coming into your business from sales, going out for taxes or payroll, and what is left over is what will determine your best option for a loan.
This is unique to every business, which is why you should seek guidance from a professional advisor. If repaying the $40,000 via a loan refinancing agreement pushes your monthly payment outside of what your business can financially support, you might quickly realize it would have been better to take the original CEBA loan!
The above is just an example and might never be the case. However, for those business owners who are eligible to refinance, what is definitely true is that there are still options available. As you explore these options, thinking about what you can afford each month, in addition to the overall cost of the loan (via a repayment calculator), will help you make the right choice for your business.
Frequently Asked Questions
Which companies still qualify for government loan forgiveness?
Companies that have applied to the financial institution that holds their CEBA loan for CEBA refinancing automatically qualify for an extension to the loan forgiveness date to March 28, 2024. As long as you applied to your bank or credit union before January 19, 2024 the extension to the loan forgiveness of up to \$20,000 will apply.
If I did not apply for a CEBA refinancing loan with the financial institution that has my CEBA loan and did not repay, what happens?
Answer: The CEBA loans that have not been repaid prior to January 18, 2024 have converted into a term loan with a 5% per year interest rate and the principal (either $40,000 or $60,000) due in full before December 31, 2026. As of January 19, 2024, all outstanding CEBA loans are accruing interest at a rate of 5% regardless if the company qualifies for the government loan forgiveness.
Can I apply to my bank or credit union for CEBA refinancing?
If you have not applied to your financial insition for CEBA refinancing prior to January 18, 2024, you do not qualify for the government forgiveness. However, there is no reason your bank or credit union will not extend a loan to you so that you can repay the CEBA loan. However, is is probably more economical to continue with the CEBA loan. Check out our calculator here.
