Are you preparing to repay your CEBA loan? Whether you’re a small business owner or self-employed, the Canada Emergency Business Account (CEBA) has been a significant relief for Canadians impacted by the COVID-19 pandemic. However, as the loan repayment deadline approaches, it’s natural for many questions to arise.
To assist you in comprehending how to effectively repay your CEBA loan, we’ve compiled essential facts and guidelines to streamline the process.
CEBA Loan Repayment for Businesses
By December 31, 2023, Canadian business proprietors who availed of a CEBA loan are obligated to settle the outstanding balance to capitalize on the loan forgiveness opportunity. Post this date, any unpaid portion of the loan will begin accruing interest. At a reasonable 5% interest rate, CEBA loans fare well compared to other lending institutions. Yet, the primary drawback of missing the deadline is the forfeiture of loan forgiveness eligibility.
CEBA loans were distributed in two tiers: an initial $40,000 and an extended amount of up to $60,000 for eligible businesses as the pandemic’s impacts endured. The forgiveness cap was set at $10,000 and $20,000, respectively, rendering forgiveness viable for 25-33% of the loan. To avail this forgiveness, business owners need to repay the remaining 67-75%, which translates to up to $30,000 or up to $40,000, depending on the loan.
Fortunately, business owners have a range of potential options to facilitate CEBA loan repayment. One possibility is repaying the loan in full, either as a lump sum or through a series of installments. Nevertheless, given that 49% of small businesses continue to grapple with below-average revenues post-pandemic, many enterprises may find this approach challenging.
As the December 31, 2023 deadline nears, many businesses are considering alternate avenues. These options encompass:
Refinancing the CEBA loan with another financial institution can be advantageous for numerous businesses. Although this might entail higher interest based on your financial situation, it could prove preferable to rolling over the CEBA amount. Repaying the loan not only reinstates forgiveness eligibility but also enables repayment over an extended period or with terms that align better with your budget. The Business Development Bank of Canada might offer favorable terms compared to other lenders due to its entrepreneurial support mandate.
Partial Loan Refinancing
For businesses that secured a $60,000 loan, repaying $40,000 is requisite for accessing forgiveness. If your business can manage a partial repayment, say $15,000, you might explore financing a smaller portion from a lender—leading to reduced rates and improved terms.
Borrowing or Angel Investing
Depending on your circumstances or business nature, the Canadian Federation for Independent Businesses (CFIB) suggests borrowing the owed amount (up to the forgiveness limit) from a family member, connection, or angel investor. It’s essential to note that this could involve relinquishing an equity stake in the business or devising a growth-oriented business plan.
In cases where making the initial CEBA repayment is challenging, it’s vital to contact your financial institution promptly to explore available repayment options. Even if the loan terms carry less favorable interest compared to CEBA rollover, repaying promptly translates to substantial savings in loan forgiveness. Bear in mind the threshold of your repayment progress; attaining the loan repayment deadline could be viable through various avenues.
Irrespective of the chosen approach, devising a plan for CEBA loan repayment before the December 31, 2023 deadline is imperative. Despite the lobbying by industry and business advocates for a CEBA loan repayment extension, it’s prudent to pay as much as possible. Diverse options are accessible for repaying your CEBA loan.
Whether you opt for a lump-sum payment or establish a structured arrangement for periodic payments, viable solutions abound. Canadian businesses can leverage refinancing opportunities to lower interest rates on CEBA loans or consider alternatives like invoice factoring or revenue financing. Debt consolidation programs are also available to simplify the repayment journey.
When embarking on CEBA loan repayment, proactive planning and execution are vital. It’s easy to procrastinate organizing a payment strategy, especially when managing a business. Nevertheless, it’s crucial to ensure timely loan repayment to enjoy program benefits.
Alternate Paths for CEBA Loan Payment
The imminent CEBA loan repayment deadline carries a significant advantage. While the task might seem overwhelming or confusing, numerous resources can guide you through the repayment process. If you seek personalized guidance, consider reaching out to a financial advisor or credit counseling service for tailored support and insights into your situation.
Furthermore, if pandemic-induced financial hardships affected you, you might qualify for additional COVID relief programs by the Canadian government. This could encompass loan forgiveness programs or other forms of financial aid to facilitate CEBA loan settlement ahead of the deadline.
Regardless of your chosen path, exploring all available options before making repayment decisions is essential to find the best-suited plan. With the CEBA loan repayment deadline swiftly approaching, prompt action is crucial to secure a favorable financial future. For queries or additional assistance in comprehending and managing the CEBA loan repayment process, feel free to contact us. We’re here to assist!