More than 750,000 Canadian businesses have received interest-free loans through the Canada Emergency Business Account (CEBA) program — this is part of the government of Canada’s COVID-19 Economic Response Plan. The deadline to apply was June 30, 2021.
As you continue to work towards restoring stability to your business, having a plan to make the most of your loan is important. If you’re not sure where to start, we can help.
Assess your cash flow first
Before you start paying expenses with your CEBA funds, consider your business' cash flow. Are you using quick turnaround methods, like credit cards, to collect payments from customers? Could a rebate or incentive encourage customers to make more up-front payments instead of smaller ones over longer periods of time? You should take all reasonable measures to firm up your cash inflows before dipping into your CEBA loan.
Use your CEBA loan for non-deferrable expenses
Make a prioritized list of your non-deferrable operating expenses. This will help you figure out how to distribute the funds from your loan. You’ll want to use these funds to cover large expenses that are at risk of incurring fees, or to pre-pay expenses with early-payment discounts or rebates. Smaller, less urgent costs can be covered with free cashflow or a Business Credit Card. A credit card gives you some flexibility because you have an extra 30 days to pay off your purchases.
Repaying your CEBA loan
Business debt can be a source of anxiety, especially in a turbulent economy, but the CEBA loan gives you some breathing room. Before you rush into paying back your loan, review the repayment terms:
Your loan is interest free before December 31, 2023, and principal payments are not required.
If the loan isn’t repaid by January 1, 2024, the loan becomes a 2-year term with a 5% fixed interest rate per year. Only interest payments are required on a monthly basis with the outstanding principal due in full by December 31, 2025.
Depending on the amount of your CEBA loan, the amount that is eligible for forgiveness will vary. The forgiveness benefit allows a portion of your loan to not require repayment:
If you received a $40,000 CEBA loan, you can repay 75 percent of the total amount ($30,000) by December 31, 2023 and the remaining 25 percent ($10,000) is eligible for a loan forgiveness benefit.
If you received a $60,000 CEBA loan, you can repay 66 percent of the total amount ($40,000) by December 31, 2023 and the remaining 34 percent ($20,000) is eligible for a loan forgiveness benefit.
The forgivable portion of the CEBA loan, $10,000 or $20,000, is taxable in the year in which the loan is received. It may be a good idea to create a repayment plan, one that helps you stay on track to pay back the repayable portion of your loan in time, so you can take advantage of the forgiveness benefit.
To make CEBA loan payments, sign on to CIBC Online Banking for Business, using your Business Banking Convenience Card number and password. Then follow these steps:
Select the Customer Services tab.
Under Account Services, select CEBA Loan Repayment.
Under To Account, select the CEBA loan you want to repay.
Choose the From Account.
Enter the repayment amount.
Review payment details. If satisfied, select Yes. CEBA loan payments can take 24 to 72 hours to process. Make sure there are enough funds in the account until your payment has gone through.
Print the confirmation page for your records.
Note:The CEBA loan balance on Online Banking can take up to 6 weeks to update.
Talk to an advisor or accounting professional for financial advice
Whenever you make changes to your finances, it’s always important to consult a trusted advisor who understands your unique business needs.
Also, if you have other borrowing needs, CIBC is here to support you.
Connect with a dedicated CIBC Business Advisor, who will work with you to create a tailored plan for your business and provide expert advice to help you achieve your goals. Whether you need to review your borrowing options or cash management needs, or you just need a little extra support, we’ll make it easy for you to make your ambitions a reality.
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