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

Is CEBA Interest-Free?

is CEBA interest-free
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In the era of an uncertain financial climate, businesses worldwide are grappling with unprecedented challenges. However, among this adversity, a ray of hope emerges: The Canada Emergency Business Account (CEBA). But what exactly is this financial lifeline, and does it truly come without the traditional burdens of interest?

Let’s delve into the heart of the matter and uncover the realities of CEBA, including the most asked question: “Is CEBA interest-free?” After reading this article, you will be equipped with the knowledge to make an informed decision about CEBA and your business’s future.

What is The Canada Emergency Business Account (CEBA)?

Is CEBA Interest-Free?

The Canada Emergency Business Account (CEBA) is a government initiative spearheaded by the Canadian Government to provide financial support to small businesses dealing with the economic impact of the COVID-19 pandemic. Introduced in 2020, CEBA provides these businesses with interest-free loans of up to $60,000, with the aim of helping them cover their operating costs during a period where their revenues have been temporarily reduced.

How Does the CEBA Loan Work?

How CEBA Work?

The CEBA loan works like any other loan, with a few key differences. Here are the two important things you need to know about the CEBA loan:

Number 1. CEBA Loan Eligibility Criteria

The first thing to consider when exploring the prospect of a CEBA loan is the eligibility criteria. The Canadian government has provided a broad spectrum of organizations the opportunity to benefit from this financial support. Small businesses, not-for-profit organizations, sole proprietors, businesses that rely on contractors, and even family-owned corporations that pay their employees through dividends rather than traditional payroll are all eligible for this loan.

However, there are specific rules concerning business operations and banking relationships. The business must have either opened a business banking account with a participating financial institution (FI) on or prior to March 1, 2020, or have been operating its business since March 1, 2020, using a personal bank account. If using a personal bank account, the business must have successfully opened a business bank account with a participating Canadian FI upon applying for the CEBA loan.

Another essential factor to note is exclusivity. The business must not have used the original CEBA loan program before and cannot apply for CEBA support at another FI once the application process has begun. Finally, the business must express an intention to continue to operate or resume operations. It’s also required to agree to participate in post-funding surveys conducted by the Government of Canada or its agents. This comprehensive set of criteria ensures that the assistance reaches those in genuine need, fostering a more resilient and sustainable business sector in the wake of the pandemic.

Number 2. CEBA Loan Application Process

The second critical aspect to understand when considering a CEBA loan is the application process itself. Designed to be as straightforward and user-friendly as possible, the process commences with a thorough self-assessment to ensure that you meet the CEBA eligibility criteria outlined by the Canadian government.

Once you’ve confirmed your eligibility, you can initiate your application directly through your business bank account’s online banking interface. This approach aids in streamlining the process, minimizing the time spent on paperwork, and ensuring that businesses receive the vital financial support they need without undue delay.

For those applying via the non-deferrable expenses stream, the application process entails a few extra steps. The organization must complete their application through their bank’s website and subsequently submit it to a dedicated Government of Canada portal. Along with this application, additional documentation demonstrating proof of 2020 eligible non-deferrable expenses, such as invoices, receipts, or contracts, must be provided.

Before starting the application process, organizations should prepare their supporting documents and ensure they have their nine-digit business number, which will be required during the application. For businesses banking with smaller or rural financial institutions, it may be necessary to contact the institution for more information on the specific application process.

Upon successful approval of your application, the funds are directly deposited into your business account. You can then utilize these funds according to the specified uses outlined by the CEBA loan terms and conditions. Understanding each step of the application process is key to successfully securing a CEBA loan and, ultimately, safeguarding the future of your business during these challenging times.

Is CEBA Interest-Free?

Is CEBA Interest-Free? Yes or No?

Yes, CEBA is interest-free. This confirms that businesses do not have to worry about accruing interest on the loan amount. Diving deeper into the details, the unique aspect of CEBA loans, and one that sets it apart, is the opportunity for loan forgiveness. This means that businesses do not have to repay the entire loan amount under specific conditions.

CEBA forgiveness plays a pivotal role in providing financial relief to businesses during these economically challenging times. The extent of the partial loan forgiveness is, however, dependent on the loan amount. It’s crucial to understand that CEBA offers interest-free loans of up to $60,000. For businesses that borrowed less than $40,000, the government will forgive 25% of the loan, provided the principal is paid off by December 31st, 2023. To put it in simple terms, if you borrowed $40,000 and managed to repay the full amount before the set deadline, you’d be entitled to keep $10,000 of the CEBA loan forgiveness amount.

Conversely, for businesses that borrowed more than $40,000 up to the maximum limit of $60,000, the forgiveness parameters differ slightly. The government still forgives 25% of your loan, but this is applicable only to the first $40,000. For the remaining amount (up to $20,000), the government forgives a whopping 50%, or up to a maximum of $10,000. This implies that if you borrowed and repaid $60,000 before December 31st, 2023, you could retain up to $20,000 of your loan. Although this amount is considered taxable, it offers a significant financial advantage to businesses. In essence, CEBA provides an opportunity to secure an interest-free loan of up to $60,000, a portion of which could be forgiven if repaid in a timely manner.

When is CEBA Not Interest-Free?

When Is CEBA Not Interest-Free?

While the CEBA program provides an exceptional interest-free period until December 31, 2023, it’s essential to understand the implications if you can’t meet this CEBA loan repayment deadline. If any amount of the principal remains unpaid after this date, the loan’s terms change, with the remaining CEBA loan balance beginning to attract interest at a rate of 5% per annum. This creates an additional financial burden for businesses unable to clear their debts within the interest-free period.

Starting January 1, 2024, monthly interest payments become a requirement, calculated based on the outstanding balance and the 5% annual interest rate. At this point, the opportunity for loan forgiveness is no longer available, meaning the full principal amount will need to be repaid by December 31, 2025.

However, there is some flexibility in these terms. You can repay the remaining loan balance at any point without penalties, offering the chance to manage your repayments according to your financial capacity. Whether you choose to clear the debt in installments or pay off the entire sum in one go, the option is open, providing a degree of control over your financial management in these challenging times. The crucial point to remember is that the CEBA loan, while offering initial relief, can lead to additional costs (or we should say interest) if not managed effectively within the specified repayment deadlines.


In conclusion, the CEBA loan indeed offers a unique opportunity for businesses grappling with economic challenges. The ability to secure an interest-free loan up to $60,000, with a portion of it potentially forgiven, can provide significant financial relief. Yet, it is critical to understand the conditions tied to “Is CEBA interest free?” question.

The loan stays interest-free until December 31, 2023, and can be partially forgiven if repaid by this date. However, failing to meet this deadline imposes a 5% interest rate on the remaining balance, eliminating the possibility of loan forgiveness. Thus, while CEBA can be a lifeline for businesses, it requires careful financial planning and timely repayment to fully reap its benefits and avoid additional costs.

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