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How to Repay Your CEBA Loan

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The pandemic brought about a great deal of uncertainty and stress, particularly for small business owners in Canada. Luckily, the Canadian Emergency Business Account (CEBA) program provided some relief and stability during those exceptionally challenging times.

On December 4, 2020, business owners were granted an increase on their original $40,000 CEBA loan. They received an additional $20,000. Now that the loan is coming due soon, the federal government is providing a further economic benefit to small businesses; a loan forgiveness benefit of up to 33% of the loan – so long as it’s paid by January 18, 2024.

The question now is: How can small business owners repay their CEBA loan with little cash on hand or limited ability to borrow?

Merchant Growth financial experts provide a breakdown of the CEBA loan, its forgiveness benefit, and how you can repay the loan with the help of our CEBA Refinance program.

What is the Canada Emergency Business Account (CEBA) Program?

In the first year of the pandemic, the government of Canada enacted a COVID-19 Economic Response Plan that provided over 750,000 Canadian businesses with interest-free loans through the CEBA program. The purpose of CEBA was to provide eligible businesses with the means to pay for:

  • Operating expenses,
  • Payroll; and
  • Other non-deferrable expenses.

In October 2020, the government announced that it was joining forces with Export Development Canada (EDC) and financial institutions to expand the program to allow for an interest-free CEBA loan amount of $20,000 with loan forgiveness.

CEBA Loan Repayment Terms

Before jumping into repaying the loan, it’s important to review the terms. Businesses who received a $40,000 (or $60,000 CEBA loan with the additional $20,000) and who repay the balance by January 18, 2024 will gain loan forgiveness of up to 33%.

Borrowers can make principal payments at any time, and they won’t have to pay any fees or penalties. There won’t be any interest until January 19, 2024.

Each CEBA loan has a forgiveness amount based on the total amount a small business received ($40,000 or $60,000):

  • Up to $10,000 loan forgiveness is available on eligible CEBA loans advanced for $40,000, provided $30,000 is paid back prior to January 18, 2024.
  • Up to $20,000 loan forgiveness is available on eligible CEBA loans advanced for $60,000, provided $40,000 is paid back prior to January 18, 2024.

Once we pass the January 18, 2024 deadline, (or March 28, 2024 if a refinancing application is submitted prior to January 18, 2024 at the financial institution that provided their CEBA loan) there will be a 5% annual interest charged to the remaining balance beginning January 1, 2024. Only interest payments are required to be paid monthly, with the outstanding principal due by December 31, 2026.

Making the CEBA loan repayment may be difficult for your small business, depending on how things go during this unique and uncertain time. If that’s the case, Merchant Growth can create a structured and customized payment plan to help you pay off your CEBA loan amount in 2023, thereby benefiting from the forgiveness program

Options for Repaying a CEBA Loan

If a small business owner would like to repay their CEBA loans, there are a few different routes that can be taken.

Use Available Funds

For businesses that have the available funds to pay back their loan, this is certainly an option. However, given the value of the amount that needs to be repaid, this could cause a significant shortfall to the business’ cash flow, that could otherwise be used for other business expenses.

Use a Traditional Financial Institution

While this may be a good fit for certain small business owners, given the overall volume of small business owners who need to pay back the loans, and the corresponding surge in demand, this will not be possible for all. Banks still have more rigid eligibility requirements as they do with other types of business financing, and they simply will not be able to approve or fund all applicants.

Use an Alternative Lender

Refinancing your CEBA loan with a company such as Merchant Growth allows you to take advantage of the forgiveness program, and avoid the uncertainty of long waiting times from the banks for a credit decision and the uncertainty of approval.

Join the Merchant Growth CEBA Refinance Program

Eligible CEBA small businesses can apply for our CEBA Refinance program, aka “CEBA Refi”. It lets you:

  • Benefit from the CEBA loan repayment forgiveness offered by the government.
  • Have a much lower principle & interest cost compared to the federal government’s principle and interest paid over two years.
  • Have the proceeds automatically paid into your CEBA institution.
  • Make automatic daily or weekly payments.

Contact us to learn more!

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