(updated for announcements made 14 September 2023)
If you participated in the Canadian governments COVID business loan program (called the “Canadian Emergency Business Account” or CEBA for short) then you benefited from a loan of up to $60,000 of cash during the pandemic.
But like all good things, they come to an end and these loans have an important deadline coming up. While the loan itself is not due until 31 December 2026 (extended from 31 Dec 2025), if you repay most of the loan by 18 January 2024 (extended from 31 Dec 2022) you will qualify for up to $20,000 in loan forgiveness.
So if you don’t repay the loan early you are giving up on up to $20,000 of FREE MONEY!! That’s like an interest rate of up to 15% which you could have avoided!
How do I get the forgiveness?
It’s simple – repay the balance of your loan, less the amount of the forgiveness, by 18 January 2024. The forgiveness should be automatic.
The forgiveness is 25% of the first $40,000 borrowed, plus 50% of the next $20,000 borrowed. So if you borrowed $30,000 then the forgiveness amount will be $7,500 and you will have to repay $22,500 by 18 January 2024. If you borrowed $40,000 then you need to repay $30,000 and if you borrowed $60,000 you will need to repay $40,000.
You do not need to wait until 18 January 2024 to start repaying. Most businesses can see the loan on their online banking and you can simply start repaying funds into this account. Contact the bank that advanced the funds if you are not sure what to do.
What happens if I don’t repay everything on time?
First of all, you lose the ENTIRE amount of the forgiveness! If you borrowed $60,000 and you have repaid $39,990 by the deadline, you are $10 short. This $10 will cost you $20,000 in forgiveness and you will still owe $20,010. Ouch!
From 19 January 2024 the loan turns into a 5% p.a. Loan repayable in full by 31 December 2026. Interest payments are required after 19 January 2024 (contact your lender to find out how frequently these interest payments are required). These loans are NOT extendable.
What should I do now?
If your cash flow can support it, I recommend setting aside enough money each month to pay off the loan less the forgiveness. You can pay this directly to the lender (this is the safest option) or into a separate savings account and then pay off in bulk at the end of the year. But DO NOT miss this deadline or it will cost you dearly!
If your cash flow will not support paying off this loan by the forgiveness date I suggest looking for alternative financing options NOW. Borrowing $40,000 at 22% would be about the same as repaying $60,000 at 5% interest (which is what you would be up for if you missed the repayment). So talk to your bank, talk to your family, and look under your cushions – do anything you can to be able to pay this loan back before the forgiveness deadline.
Some people have received letters from their banks claiming that they are not eligible for the forgiveness. This is likely because they have failed to maintain other loans on good standing with the bank and the loan agreement may have required this to maintain this loan in good standing. You should talk to your bank to verify these details (this is the responsibility of the bank, not the government, so don’t let the bank fob you off onto the government here – there is no one to take your call on this matter at the Federal level!).
