Prime Minister Extends CEBA Loan Repayment Deadlines and Increases Flexibility for Small Businesses and Non-Profits

Prime Minister Justin Trudeau
Prime Minister Justin Trudeau

Prime Minister Trudeau has unveiled a series of measures aimed at providing further financial relief to Canadian businesses and non-profit organizations grappling with the aftermath of the COVID-19 pandemic.

The new measures include extended deadlines for the Canada Emergency Business Account (CEBA) loan repayments, offering added flexibility for loan holders seeking partial loan forgiveness of up to 33 percent.

The CEBA program, which was initially launched on April 9, 2020, and ran through June 30, 2021, played a pivotal role in supporting small businesses and not-for-profit organizations by providing interest-free, partially forgivable loans totalling $49 billion. These loans, which could reach a maximum of $60,000 per recipient, were designed to assist in covering operational costs during the challenging pandemic period.

To alleviate some of the financial burdens faced by these entities, the government has decided to extend the CEBA loan repayment deadline. The previous deadline of December 31, 2023, has been pushed forward to January 18, 2024, recognizing the busy year-end period for Canadian businesses. This extension builds upon the government’s prior decision to grant a one-year extension in January 2022.

For CEBA loan holders who opt to initiate a refinancing application with the financial institution that provided their original CEBA loan by January 18, 2024, an additional refinancing extension until March 28, 2024, has been implemented. This extension will facilitate more small businesses and non-profits in accessing much-needed relief, affording them more time to await responses to their refinancing applications from their financial institutions.

Starting from January 19, 2024, outstanding loans, including those covered by the refinancing extension, will automatically convert into three-year term loans. These loans will carry a modest annual interest rate of five percent, with the term loan repayment date extended by an extra year, stretching from December 31, 2025, to December 31, 2026. Essentially, this means that small businesses and non-profit organizations will be granted access to a three-year, low-interest loan of up to $60,000 if they have not repaid or refinanced their existing loan. This extension will be particularly beneficial to those who find it challenging to secure refinancing or generate sufficient cash flow to meet their loan repayment obligations by the forgiveness deadline.

Repayment made on or before the newly established deadline of January 18, 2024 (or by March 28, 2024, if a refinancing application is submitted to the financial institution that originally provided the CEBA loan), will result in substantial loan forgiveness. Specifically, those with a $40,000 loan will receive $10,000 in partial loan forgiveness, while those with a $60,000 loan will enjoy $20,000 in partial loan forgiveness.

Restaurants Canada is disappointed in the announcement from the Federal Government today on the much-needed extension of the Covid Emergency Business Account (CEBA) loan repayment period. For a year we have been pleading with government to extend the interest-free period by a year. This would give restaurants the time they need to pay back this loan, which for many, was a lifeline to survive the Covid-19 lockdowns.

The initiative has tried to make the case that extending the loan is a fair and reasonable request in order to give restaurant operators the time they need to pay back these loans. The government has now made it so that the year-long extension on the CEBA repayment, is conditional on beginning repayments and refinancing the loan in full by March 28th, 2024.

“Because of record level inflation on all costs to operating a restaurant, and according to a Restaurants Canada survey in July of this year, 51 % of restaurants are operating at a loss or barely breaking even. This is compared to 12% pre-pandemic.” said Kelly Higginson, President and CEO of Restaurants Canada. “We are very concerned that these restaurants who have not yet recovered from the pandemic debt and inflation will not be able to refinance.  This could cause the closure of thousands of restaurants in communities large and small across our country.”

Restaurants Canada is calling on the Federal Government to revisit their repayment plan calling on the government to show compassion and understanding to our operators. We need the Federal Government to extend the interest-free period and allow restaurants to access the forgivable portion of these emergency loans that were taken out to survive the Covid-19 lockdowns. This is how we keep the beating hearts of our communities open for business.

CFIB Disappointed with New Trudeau Announcement

The Canadian Federation of Independent Business (CFIB) is disappointed with the announcement on changes to the Canada Emergency Business Account (CEBA).

CFIB says that the government has failed to address the most critical issue on outstanding CEBA loans – the loss of the $20,000 forgivable portion for those unable to repay the loans by year end. The extension of the forgivable deadline by a few weeks will be of very little value to the thousands of small business owners who just don’t have money to repay now.

According to the CFIB’s latest data, 69% of small businesses that accessed the loan have not yet been able to repay any of it. Only 18% have repaid their loan in full as of September.

The CFIB has been pushing the government to make changes on the CEBA front. Just in the past few months, our CEBA petition to extend the repayment deadline has garnered over 40,000 signatures from small business owners across Canada.

Here are a couple of examples illustrating how CEBA loan holders can take advantage of this enhanced repayment flexibility:

  1. Sarah and Nick, who are required to pay off their $40,000 CEBA loan but find it challenging to pay the full amount in time for the $10,000 partial loan forgiveness deadline on January 18, 2024. Starting from January 19, 2024, their loan will convert into a three-year term loan with an annual interest rate of five percent. They will make manageable monthly interest payments of approximately $167, with the principal amount only due just before the term loan repayment deadline of December 31, 2026.
  2. Doug, who applies for $40,000 in financing from the bank that initially provided his CEBA loan to settle his $60,000 CEBA loan. Doug does not receive a response to his refinancing application by January 18, 2024. However, with the introduction of the new refinancing extension, he has until March 28, 2024, to receive a response from his bank and secure new financing to pay off his CEBA loan, thus becoming eligible for $20,000 in partial loan forgiveness.

Financial institutions will be in direct contact with CEBA loan holders to provide detailed information about their respective loans and the available options.

It’s important to note that these changes also apply to CEBA-equivalent lending provided through the Regional Relief and Recovery Fund, further expanding the scope of support for businesses and non-profit organizations across Canada.

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