The Canadian government has made significant changes to CEBA repayment deadlines in 2023. The changes, which were announced in mid-September, create additional flexibility around refinancing timelines. This added flexibility (and later deadline) gives businesses more time to consider CEBA refinancing alternatives and make informed decisions about their specific situation.
But how banks and credit unions are refinancing CEBA loans? All businesses that do not have the funds to repay their CEBA loans before the January 18, 2024 deadline should get clear on their options to repay. Taking the right steps now is critical for getting the maximum timeframe (and the best deal) when planning to repay the CEBA loan.
Timeline for CEBA loan refinancing
The federal government’s announcements clarified the CEBA loan repayment date. While many borrowers might have been hoping for a longer extension, the recent announcement changed the CEBA loan repayment date (the date required to qualify for loan forgiveness) from December 31, 2023 to January 18, 2024. The extension may be just a few weeks, but the recent CEBA loan updates give businesses seeking refinancing a little more wiggle room.
Now if the borrower applies for a loan through the financial institution which holds their CEBA Loan, the repayment deadline to qualify for the loan forgiveness is automatically extended to March 28, 2024 – even if the application is denied.
Businesses can apply for a refinanced CEBA loan any time before January 18, 2024. Whether the business loan is approved or denied before March 28, 2024, the repayment deadline to qualify for CEBA loan forgiveness is extended until March 28, 2024.
How Financial Institutions Determine Eligibility for CEBA Loan Refinancing
Who can refinance a CEBA loan? It depends on your financial situation. Although CEBA loans were distributed by financial institutions, the initiative was done on behalf of the federal government as a Covid relief measure. This means that it is the federal government that designed the CEBA program.
Unlike traditional lending, there was no underwriting done to check a business’s creditworthiness before giving them a loan. The federal government decided to provide loans to SMBs, and the quickest way to get the funds into the hands of business owners was via the SMB’s existing financial institutions. This means that although the government put a number of criteria in place to determine if an SMB qualifies for a CEBA loan, none of the traditional checks on revenue history, past sales, or credit score information was done.
The result of these guidelines was that the banks disbursed the loans to any qualified company – even if their credit was poor. If a company had very poor credit or would not normally qualify for a credit facility, they could still access a loan.
Thanks to the unprecedented global situation, the federal government elected to take the risk of repayment for CEBA loans, rather than leaving it to lenders. Instead, they used the banks as a conduit for the program and to make sure operations took place. Therefore, if an SMB is asking for a CEBA refinancing loan to qualify for loan forgiveness, the financial institution is taking the risk, rather than the government – and the financial institution is held to underwriting guidelines that can be a lot more strict
After interviewing the leading banks in Canada, all of them are looking at CEBA refinancing through a common lens. The banks and credit unions are applying the same credit criteria to underwrite a loan application as they would for any loan for any reason. What this means is that the banks are not making any special allowances for CEBA refinancing. If an SMB does not qualify for a commercial loan, the fact that it is a CEBA refinancing loan will not impact the bank’s decision to deny the credit.
Credit Unions Refinancing CEBA Loans
Many credit unions are offering to refinance CEBA loans so their clients can benefit from the government-sponsored loan forgiveness. With forgiven amounts of up to $20,000 available to business owners who repay before the deadline, it’s in nearly everyone’s best interest to give refinancing a try
Meridian Credit Union has one of the best CEBA refinancing programs, which can be found here. The CEBA refinance program offers up to $40,000 at a rate of prime plus 1.25% and repayment over 36 months. At the prime rate as of writing, the interest rate would be 8.45%. Meridian is asking you to complete a personal net worth statement to determine if you and your business qualify for a loan. Meridian has one of the most aggressive refinancing programs for its customers. Similar to other financial institutions, it should be noted that one’s personal credit is a key factor in underwriting and approving a business loan.
Vancity
Vancity has a very good infographic to help their customers plan recurring payments to repay their CEBA loans. However, if you have been unable to repay enough to take advantage of the CEBA forgiveness, you may need a loan from Vancity. Either reach out to a Vancity advisory, branch staff or call 604-877-7000 to talk to the Vencity Member Service Centre.
Coast Capital
Coast Capital has a dedicated webpage for clients to assist in repayment. The form found here allows Coast Capital customers to select from a variety of repayment options. If you would like a CEBA refinancing loan, reach out to your cost capital business banking team member either online or by phone.
Other Credit Unions
If you bank with another credit union, they will most likely offer CEBA refinancing options. It is important to contact your credit union and put a plan in place to repay your CEBA loan. For a list of all credit unions visit this page.
How Banks and Credit Unions are Refinancing CEBA loans
All of Canada’s major banks participated in the CEBA program and most will offer to refinance CEBA loans. Some have more automated systems than others (meaning less flexibility to make a ‘judgement call’ on their financing decision) but overall their goal is to assist their customers to take advantage of the CEBA loan forgiveness.
Royal Bank of Canada (RBC)
RBC has been actively reaching out to their customers to encourage them to meet with their account manager and determine the best way to repay the CEBA loan. Most CEBA loan recipients will want to take advantage of the CEBA loan forgiveness if they can, and RBC has a portal for customers to request a CEBA refinancing loan. If you find yourself unable to repay the CEBA loan or feel that additional cash flow would benefit the business, apply for a CEBA extension loan through the RBC portal.
Toronto-Dominion Bank (TD)
TD is offering customers CEBA refinancing via their app or on their website. Customers are also welcome to visit their branch or call their account manager. The terms of the CEBA refinancing are similar to other banks with a loan payable by December 31, 2026, monthly payments and an interest rate in the low double-digits range.
Canadian Imperial Bank of Commerce (CIBC)
CIBC makes it easy to repay the CEBA loan with a link on their website here. There are also step-by-step instructions on this page. CIBC is offering to refinance CEBA loans to their customers, and are encouraging businesses to talk to their advisor to better understand their options.
Bank of Noval Scotia (Scotiabank)
Scotiabank has made it very simple to repay the CEBA loan by making a bill payment to ScotiaLine for Business VISA. However, if you are unable to repay the full amount of the loan prior to January 18, 2024, Scotiabank advisors will work with you to determine if you qualify for CEBA refinancing. Scotiabank’s rates and terms are similar to other large banks.
Bank of Montreal (BMO)
BMO is actively working with their customers to refinance their CEBA loans. BMO is offering a Credit Line of Business which can vary as low as prime plus 2% to prime plus 11%. Effectively, this is 9.2% to 18.2% if the business qualifies. The range of interest rates shows that BMO is looking to assist as many customers as possible with a wide range of credit scores – and when you take the $20,000 loan forgiveness portion into account, even a higher rate can benefit you and your business long term (of course, this depends on your situation)
National Bank of Canada (National)
National Bank has a number of options to repay the CEBA loan and will help customers refinance their CEBA loan if asked. Instructions for loan repayment can be found here. Talk with an advisor at the bank to determine if the business qualifies for CEBA refinancing. National also has a dedicated CEBA support team at support_CEBA@nbc.ca
Defaulting on the CEBA Loan Repayment
Defaulting on any loan can have a significant negative impact on your credit score and business. Despite being a government initiative, the CEBA loan is no different. If a business is not able to repay the loan, refinance from their financial institution, or obtain financing from alternative lenders such as Merchant Growth, Driven or OnDeck, the only remaining option is to continue with the CEBA loan after January 18, 2024 (or March 28, depending on whether or not you’ve applied with your bank).
Interest will accrue starting January 19, 2024 at a rate of 5% per year. Each month interest payments will be due to the financial institution where the CEBA loan is held. If monthly payments are not made, delinquent loans will be passed to the Canada Revenue Agency (CRA) for collection. It is unclear what steps the CRA may take to collect the outstanding debt, but because the CRA has significant power, it is likely that collections will be enforced. This is a worst-case scenario for many SMBs and should be avoided at all costs.
Conclusion
So, there are many options available to SMBs looking to repay their CEBA loans. The first place business owners should consult is their financial institution. Refinancing the CEBA loan through the financial institution will most likely be the lowest cost of borrowing considering the company can take advantage of up to $20,000 in government forgiveness. If the financial institution is unable to offer credit, as they are not changing their underwriting for CEBA loan refinancing, visit ceba.ca to find the best alternative financial institution to provide you with a CEBA refinancing loan.
Frequently Asked Questions
What is the process for repaying the CEBA loan through RBC?
RBC has been proactive in encouraging its customers to consult with their account managers about the best approach to repaying the CEBA loan. They offer a portal for customers to request a CEBA refinancing loan. If repayment of the CEBA loan poses a challenge, or if additional cash flow could be a business advantage, the customer can apply for a CEBA extension loan through the RBC portal.
What are the terms of the CEBA refinancing offered by TD?
TD extends its CEBA refinancing to customers through their app or website, and customers are also welcome to visit their branch or call their account manager. The terms of the CEBA refinancing align with those of other banks, with a loan payable by December 31, 2026, and an interest rate in the low double-digits range.
What steps does CIBC offer to assist with repaying the CEBA loan?
CIBC provides a straightforward method for repaying the CEBA loan by offering a link on their website. They also provide comprehensive step-by-step instructions on their site. CIBC is prepared to refinance CEBA loans for their customers and encourages businesses to consult with their advisors to fully understand their options.
