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

How Does CEBA Loan Work? Understand the Fundamentals

How Does Ceba Loan Work
Reading Time: 6 minutes

Navigating the financial world can feel like traversing a labyrinth, especially when it comes to understanding the intricacies of loans. Enter the world of CEBA Loan, a beacon of clarity in the foggy landscape of credit products designed with the user in mind. CEBA Loan gives you the power to access funds quickly and easily, all with a few clicks online.

Understanding how CEBA Loan works is crucial for smart business management. It enables businesses to make informed decisions about financing their operations and growth strategies. It also ensures that they can effectively manage their debt, avoiding potential financial pitfalls that could hinder their progress.

This article will help you understand the fundamentals of how CEBA Loan works, so you can feel confident when navigating your next round of financing.

What is a CEBA Loan?

A CEBA Loan, or CEBA, established by the Canadian government, is designed to help small businesses cover non-deferrable operating costs during a period of severe revenue reduction due to the COVID-19 pandemic. This interest-free loan provides up to $60,000, of which 33% ($20,000) is forgivable if repaid by December 31, 2022.

The ease of accessing and managing this loan makes it a lifeline for businesses struggling with the economic impact of the pandemic. Also, remember that if you are not affected by the COVID-19 pandemic, you can get up to $40,0000 interest-free loans, of which 25% ($10,000) is forgivable.

How Does CEBA Loan Work?

Here is how CEBA Loan works and where you can use it!

Eligibility Criteria for a CEBA Loan

The following criteria must be met to apply for a CEBA Loan:

  • Small businesses, not-for-profits, sole proprietors, businesses that rely on contractors, and family-owned corporations that pay employees through dividends instead of payroll are all eligible.
  • The business must have either opened a business banking account with a participating financial institution (FI) on or prior to March 1, 2020, or been operating its business since March 1, 2020, using a personal bank account and successfully opening a business bank account with a participating Canadian financial institution.
  • The business must not have used the original CEBA loan program before and cannot now apply for CEBA support at another FI.
  • There must be an intention to continue to operate the business or resume operations, and the business must agree to participate in post-funding surveys conducted by the Government of Canada or its agents.

Application Process for CEBA Loan

The process for applying for a CEBA Loan is designed to be straightforward and user-friendly. First, you must demonstrate that you meet the eligibility criteria set by the Canadian government. Then, you can apply for the loan through your business bank account’s online banking interface. The application process is streamlined to minimize the time spent on paperwork, allowing businesses to receive the financial support they need as quickly as possible.

Suppose the application is being made through the non-deferrable expenses stream. In that case, the organization must complete their application through the bank’s website and then submit it to a Government of Canada portal for additional documentation. This documentation will need to show proof of 2020 eligible non-deferrable expenses such as invoices, receipts or contracts.

For applying, organizations must have supporting documents ready and must also have their nine-digit business number, which will be used in the application. Those applying through smaller or rural banks may need to contact the financial institution for more information on the specific application process.

Once your application is approved, the funds are deposited into your business account. From there, you can use them according to the uses for which they are allowed to use.

Repayment Terms and Conditions

The CEBA Loan offers flexible repayment terms. If you repay the loan’s balance by December 31, 2022, 33% of it will be forgiven. After this date, any outstanding balance is converted into a three-year term loan with an interest rate of 5%. The loan must be fully repaid by December 31, 2025.

Understanding these CEBA Loan repayment terms is crucial to strategically plan your repayments and maximize the benefits of this financial aid. If you are unable to make timely repayments, please contact your financial institution to discuss alternative repayment solutions.

Uses of the CEBA Loan

The funds received from a CEBA Loan are not what you can consider “free money.” The loan is meant to be used for specific purposes that keep your business afloat during this time of economic hardship, and you get the maximum benefits of the CEBA Loan!

The government has outlined the following categories in which businesses can use their loan money:

  • Payroll: Businesses can use CEBA Loan funds to pay staff salaries and wages, as well as benefits such as health insurance or employer contributions to pension plans.
  • Rents and Utilities: This includes payments for rent, leasing costs, property taxes, heat, light, power, and other utilities.
  • Insurance Payments: Businesses can use CEBA Loan funds to pay for insurance premiums such as property, liability, and business interruption insurance.
  • Debt Service: Regularly scheduled payments of principal and interest on all debt obligations incurred in the course of operating the business can be covered by this loan.

However, businesses cannot use their loan money for any activities that do not serve a legitimate operational purpose. These activities include prepayment/refinancing of existing indebtedness, payments of dividends and distributions, and increases in management compensation.

Business owners need to remember that this loan must be used responsibly and appropriately. If the funds are not used for the intended purposes outlined by the government or if they are misused, the business may be required to pay back the loan in full with interest. It is also important that businesses keep a close eye on how they use these funds, as it will need to be reported accurately when they apply for loan forgiveness at the end of the program.


The CEBA Loan program is an invaluable resource for businesses affected by the COVID-19 pandemic. It offers a lifeline to organizations struggling with the economic impacts of the virus and needs financial assistance to keep their operations running. By understanding how CEBA Loan works, you can not only apply for the loan but also make sure you get the most out of it.

Remember that these funds must be used responsibly and in accordance with government guidelines, as any misuse could result in having to pay back the entire loan with interest. So, always keep track of your finances and use them for their intended purposes.


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