[Canada] COVID-19 Canada Emergency Business Account

The Canada Emergency Business Account (CEBA) was introduced to support eligible businesses during the COVID-19 pandemic. Eligible businesses are to apply for the CEBA directly through their financial institution. 

June 15, 2020 update: Eligibility requirements have been expanded to allow more businesses to apply for the CEBA. These newly added eligible businesses will be able to start applying on Friday, June 19, 2020. 
Changes include owner-operated small businesses that had been ineligible for the program due to their lack of payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll.

To qualify under the expanded eligibility rules, CEBA applicants with payroll lower than $20,000 will need:

  • A business operating account at a participating financial institution;
  • A Canada Revenue Agency business number;
  • A 2018 or 2019 tax return; and
  • Eligible non-deferrable expenses of between $40,000 and $1.5 million.

Read the news release here: 

 

What is the Canada Emergency Business Account (CEBA)?

Who is eligible for the CEBA? 

How do I apply for the CEBA? 

How am I allowed to use the CEBA?

Who is excluded from the CEBA?

How do I bookkeep the CEBA? 

What is the Canada Emergency Business Account (CEBA)?

The CEBA was introduced as part of Canada's COVID-19 Economic Response Plan. The program is to assist eligible businesses access the funds they need to get through this unprecedented time and to put them in a better position when returning to providing services.

The program will provide interest-free loans of up to $40,000 to eligible businesses, to help cover operating costs during a period where revenues have been temporarily reduced due to the economic impact of COVID-19.

If you repay the loan on or before December 31, 2022, 25 percent (up to $10,000) of the loan will be forgiven. Otherwise, the remaining balance will become a three year term loan at a five-percent interest rate.

Who is eligible for the CEBA? 

As outlined within the CEBA's FAQ, eligible businesses, or "borrowers," of the loan are defined as follows: 

  • "The Borrower is a Canadian operating business in operation as of March 1, 2020.
  • The Borrower has a federal tax registration.
  • The Borrower’s total employment income paid in the 2019 calendar year was between Cdn.$20,000 and Cdn.$1,500,000. For applicants with Cdn.$20,000 or less in total employment income paid in the 2019 calendar year:
    • The Borrower has a Canada Revenue Agency business number and has filed a 2018 or 2019 tax return.
    • The Borrower has eligible non-deferrable expenses between Cdn.$40,000 and Cdn.$1,500,000. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance. Expenses will be subject to verification and audit by the Government of Canada.
  • The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as at March 1, 2020.
  • The Borrower has not previously used the Program and will not apply for support under the Program at any other financial institution.
  • The Borrower acknowledges its intention to continue to operate its business or to resume operations.
  • The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents."

How do I apply for the CEBA? 

If you are eligible, you can apply for the loan directly through your financial institution. CEBA's webpage has a list of the 233 financial institutions that are currently participating in the program.

Each financial institution will have their own application process. That being said, you will most likely need your 2019 T4 Summary on hand, whether it is mandatory or to be provided upon request.

In Wave, you will be able to find your 2019 T4 Summary and Slips by going to the Payroll tab:

  1. Click Tax Forms
  2. Make sure the date at the top says 2019 
  3. Under Actions, click Download
  4. In Step 3, click Download employer copies of T4 slips

You will see your T4 Summary on the first page of the downloaded file.

How am I allowed to use the CEBA?

 The CEBA is to be used to pay non-deferrable operating expenses of your business, including:

  • payroll
  • rent
  • utilities
  • insurance
  • property tax

Please note the following limitation on uses of the CEBA from the FAQ:
"The funds from this loan... may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation."

Who is excluded from the CEBA?

  • Government organizations or bodies, or entities owned by a government organization or body;
  • A union, charitable, religious or fraternal organization or entities owned by such organizations of which are not registered T2 or T3010 corporations that generate a portion of revenue from the sale of goods or services;
  • Entities owned by individual(s) holding political office; and
  • Organizations that promote violence, incites hatred or discriminates on the basis of sex, gender, sexual orientation, race, ethnicity, religion, culture, region, education, age or mental or physical disability.

How do I bookkeep the CEBA? 

Wave has a detailed article outlining how to bookkeep the CEBA loan, payments towards the loan, and loan forgiveness. Take a look: 

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