Canada Emergency Business Account (CEBA) – Loan for Businesses/Non-Profits

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PLEASE ALSO REVIEW THE LATEST VIDEO (POSTED ON APRIL 20, 2020) FOR REVISED INFORMATION/ELIGIBILITY CRITERIA REGARDING CEBA. Small to medium size business can qualify for $40,000 loan through their financial institutions. This lecture explains the eligibility criteria and features of CEBA.

This lecture is taught by Amer Mushtaq, LL.B., M. Engineering , B.Sc. (Hons.), who is the Principal and Founder of Formative LLP.   Through his YouTube channel, YouCounsel, Amer shares practical advice from his years of legal experience to help anyone access justice and achieve their goals.  Subscribe today to learn more.


Show Notes:


Lecture Slides:

Welcome to YouCounsel.

Today we will talk about Canada Emergency Business Account (CEBA). This is a program launched by the Canadian government to assist small businesses, medium sized businesses, nonprofit organizations and charities, in this difficult time due to Covid-19. We will explain the features of this program, the eligibility criteria, etc.

We begin with our usual disclaimer that this lecture is not legal advice.  If you have any specific questions regarding your issues, you should contact a lawyer or a paralegal or the Law Society of Ontario for a referral or your accountant or your financial institution.

We will explain the purpose of CEBA. We will explain the eligibility criteria and we will talk about some of the features. Then we will explain how you go about applying for this loan.

Essentially, if the loan is for $40,000 dollars and it is meant for small to medium sized businesses or nonprofit organizations or charities.  The purpose of the loan is to assist these organizations in their operational expenses that cannot be deferred. What are some of those expenses?  It could be your rent, could be your payroll, your supplier bills, insurance, property tax, etc. To qualify for this loan the business must be eligible.

Let’s talk about the eligibility criteria. It is pretty straight forward.  The business must have paid $50,000 to $1,000,000 in salaries to its employees in 2019. Non-profit organizations must have filed a T2 return, which is their annual return for the 2019 tax year.  Similarly, charities must have filed a T3010 return for the 2019 tax year.

Let’s talk about some of the features of this loan.  First of all the duration of this loan: until December 31st 2020 this $40,000 is considered a revolving line of credit. You can take the money out, put it back in.  After December 31st 2020, the outstanding balance converts to a non-revolving loan for a 5 year term and that term matures on December 31st 2025—that means that you need to pay back the loan by December 31st 2025.

Let’s talk about interest. What is the amount of interest on this loan? There is no interest until January 1st 2023. Starting January 1st 2023 you will accumulate 5 percent interest per annum, which is payable monthly.  25 percent of the loan can be forgiven.  How does that happen? Whatever your balance is as of January 1st 2021, whatever the balance amount is, if you pay 75 percent of that amount on or before December 31st 2022, the remaining 25 percent is forgiven. Let’s take an example.  Let’s say the balance as of January 1st 2021 was the entire amount $40,000 and you paid $30,000 on or before December 31st 2022, then the amount of loan that is forgiven is $10,000.

How do you apply for this loan?  It is pretty straight forward. You contact your financial institution, whether it’s RBC, Bank of Montreal, Bank of Nova Scotia, whatever the bank is, contact them, they have online applications available. You check the requirements and fill out the application and send it to your bank.  Then the bank will decide whether you are eligible for the loan and whether the loan is approved or not. If you’re a smaller medium sized business or a nonprofit organization, hopefully you will be able to take advantage of this loan in this difficult time.

Thank you for watching.

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