The COVID-19 pandemic has caused economic disruptions all over the world, and Canada is no exception. Small and medium-sized businesses have been affected the most, and the Canadian government has stepped up to help them through the Canada Emergency Business Account (CEBA) program. CEBA loans were introduced to provide interest-free loans to eligible businesses to help them cover their operating costs during the pandemic. In this blog post, we will discuss how small business owners can make the most of CEBA loans, including repayment and refinancing.
1. What is CEBA?
CEBA is a government program that provides interest-free loans of up to $60,000 to small and medium-sized businesses affected by the pandemic. Businesses that are eligible for CEBA include those that pay payroll, have a total payroll of $20,000 to $1,500,000 in 2019, are Canadian-operated, and have an active business account with their lender on or before March 1, 2020. The loan is interest-free until the end of 2022, after which the interest rate will be 5%.
2. Repayment of CEBA
The repayment of CEBA has been extended from December 31, 2022, to June 30, 2023, and the government has made some changes to the loan repayment process. Instead of repaying 75% of the loan balance by December 31, 2022, businesses must now repay only 50%. The remaining 50% of the loan balance must be repaid by June 30, 2023. However, if a business is unable to repay the loan by the deadline, it will be converted to a term loan with an interest rate of 5%.
3. Refinancing CEBA
Business owners who have already received CEBA loans can refinance them by taking out an additional loan of up to $20,000. The government has recently announced that the deadline for applying for the additional loan has been extended from March 31, 2021, to June 30, 2021. The process of refinancing CEBA is similar to that of applying for the initial loan. Business owners must submit an application to their lender, and they may be required to provide additional documents such as payroll information or tax returns.
4. Using CEBA for business expenses
CEBA loans can be used to cover various business expenses, including rent, utilities, payroll, and other operating costs. To make the most of the loan, business owners should create a budget that outlines their anticipated expenses and ensures that they use the loan funds as efficiently as possible. It is also recommended that business owners keep track of their expenses and maintain accurate records.
5. Alternatives to CEBA
While CEBA loans can be a valuable source of funding for many small and medium-sized businesses, they may not be suitable for everyone. Business owners who are seeking alternative sources of funding may consider other government programs such as the Canada Emergency Rent Subsidy (CERS) or the Canada Emergency Wage Subsidy (CEWS). Additionally, business owners may apply for a traditional bank loan or a line of credit.
CEBA was introduced to help small and medium-sized businesses in Canada cope with the economic impact of the COVID-19 pandemic. Business owners who have received CEBA loans can make the most of them by using the funds for eligible expenses, creating a budget, and tracking their expenses. Additionally, business owners should be aware of the repayment and refinancing options available to them. If CEBA is not suitable for their needs, business owners can explore other sources of funding such as CERS, CEWS, traditional bank loans, and lines of credit. By taking advantage of the resources available to them, business owners can navigate these challenging times and come out stronger in the end.