Due to the nature of COVID-19 and its impact on businesses, the Canadian government announced its plans for the Canada Emergency Business Account on May 19th, 2020. Eligible businesses can receive up to $40,000 in order to help keep them afloat during these times when business might be slow. Whatever the amount a business is able to get, it is important to note that if 75% of the loan is repaid in full by December 21st, 2022, 25% of the total amount will be forgiven.
The terms of the CEBA account is as follows:
- If not repaid by December 31st, 2022, it will be turned into a 3-year term loan and charged 5% interest every month
The following outlines the criteria that a business has to meet in order to be eligible for the CEBA account:
- Must have a CRA business number
- Must be operational before March 1st, 2020
- An active business account with a financial institution; personal bank accounts do not count
- 2019 payroll of $20,000 to $1,500,000 (The amount in Box 14 of the business T4)
- Funds must be used for business expenses such as:
- Payroll, rent, utilities, property tax, etc.
The following types of business are not eligible for the CEBA account:
- Government jobs/government-owned organizations
- Businesses owned by persons in a political position
- A union, charity, or religious organization unless a portion of their income is from taxable sales and services. (T2 or T3010 Tax Return)
Keep in mind that businesses can only apply at one financial institution and it must be the main institution where they have their active business account. Attempting to open a CEBA account at more than one financial institution may have legal consequences
To apply, businesses must go online and apply through their main financial institution. Each website should have instructions on how businesses can proceed and apply for the account. Any questions regarding the application process and other inquiries can be directed to the financial institution.