The federal government has announced that it will expand access to the Canada Emergency Business Account. The program, which launched in April, provides interest-free loans of up to $40,000 (with as much as 25 per cent forgivable) to help small- to medium-sized businesses impacted by COVID-19 cover fixed costs such as rent, utilities and wages.
Under the program’s original terms, Canada Emergency Business Account loans were restricted to organizations with payroll of between $50,000 and $1 million in 2019. It was then expanded to include small businesses and not-for-profits that could demonstrate payroll expenditures in 2019 of between $20,000 and $1.5 million.
Now, in response to calls from across the business community to broaden CEBA once again to provide aid to smaller SMEs, the federal government has announced a further expansion to include sole proprietors that take income directly from their business, companies that rely mainly on contractors and family-owned corporations that pay employees through dividends rather than payroll.
To qualify under the updated rules, organizations with payroll of less than $20,000 would need to:
- Have a business operating accounting with a participating financial institution in Canada
- Have a Canada Revenue Agency business number, and to have filed a 2018 or 2019 tax return
- Have eligible non-deferrable expenses of between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance
Ottawa says that expenses will be subject to future verification—and potentially audit—to confirm their eligibility. The government added that steps are being taken to provide aid to business owners that operate their business through a personal bank account rather than a business account, as well as for start-ups that have yet to file a tax return.
Additional CEBA eligibility rules require a borrower to:
- Be a Canadian operating business as of March 1, 2020
- Be registered to pay federal tax
- Have an active business with a business or chequing account with a qualifying lender (e.g., their primary financial institution). The account must have been opened on or before March 1st, 2020
- Have not previously used CEBA or have applied for the program at another financial institution
- Acknowledge their intention to continue (or resume) operating their business
Government agencies, unions, charities and religious organizations are excluded from the program.
Our team will keep you updated on the latest measures to aid businesses impacted by COVID-19 as they become available. If you have questions about CEBA or other government relief programs, please contact a member of our team.
Armando Iannuzzi, Co-Managing Partner