The federal government announced late last week that it is once again extending the repayment deadline for outstanding Canada Emergency Business Account (CEBA) loans. Organizations with outstanding balances will now have until January 18, 2024 (extended from December 31st, 2023), to repay their loans and still qualify for partial loan forgiveness. Ottawa last extended the CEBA repayment deadline in January 2022, when it was announced that businesses would have an extra year to repay their loans.
Organizations that repay their loans on or before January 18th, 2024—or those that submit a loan refinancing application prior to that date (to the financial institution that provided their CEBA loan) and repay their loan by March 28th, 2024—will still qualify for loan forgiveness of $10,000 on $40,000 loans and $20,000 on $60,000 loans.
After the new deadline, the government explains that “… outstanding loans, including those that are captured by the refinancing extension, will convert to three-year term loans, subject to interest of five per cent per annum, with the term loan repayment date extended by an additional year from December 31, 2025, to December 31, 2026.” This means that borrowers in this category will be ineligible for partial loan forgiveness, but will have extra time to repay the outstanding principal and will only be required to make interest payments until that deadline.
The decision follows lobbying by a wide range of small business groups. They argued that many SMEs are only now regaining their financial footing in the wake of the pandemic, but lack the funds needed to pay back their CEBA loans. Reports indicate that fewer than 25 per cent of borrowers have fully repaid their loans.
The CEBA program was launched at the height of the COVID-19 pandemic to aid businesses struggling to stay afloat amid government mandated-lockdowns and the subsequent collapse in revenue. Available from April 9th, 2020, to June 30th, 2021, the measure provided interest-free loans of as much as $60,000 to help qualifying businesses and not-for-profit organizations pay for operating costs such as rent and payroll. Approximately 900,000 organizations took part in the program.
While the federal government is promoting the added flexibility provided by this latest CEBA repayment deadline extension, it’s clear that an additional 18 days to repay will have minimal impact for those organizations that hoped to take advantage of the loan forgiveness aspect of the program. In the end, businesses already struggling to make ends meet will be forced to manage an even greater debt load—one that some of them may be unable to repay by 2026.
If you have questions about the Canada Emergency Business Account program, contact a member of our team.
Armando Iannuzzi, Co-Managing Partner