Canada Emergency Business Account (CEBA) Upcoming Repayment

Are you ready to make your CEBA Loan Repayment by December 31, 2023?

Recap of what the CEBA was for: The Canada Emergency Business Account was one of the initiatives that the Government of Canada created as a way to support business owners during the COVID-19 Pandemic. The initial support payment was a $40,000 non-interest bearing loan with $10,000 being forgivable if the amount was repaid IN FULL by its due date. There was then an additional $20,000 that became available as the COVID-19 Pandemic continued beyond what was initially anticipated. Of this additional $20,000 only $10,000 needed to be repaid. In 2021, if a business received the initial $40,000 CEBA loan, they were to include $10,000 into their income for the forgiven amount. And then if they were the recipients of the additional $20,000 loan in 2021, they were required to include $10,000 of the forgiven portion in their 2022 tax return. The initial repayment date was December 31, 2022 but then as that day approached, the government extended the payment date to December 31, 2023.

We don’t expect that there will be any more extensions on this repayment date.

If you have the funds available to repay your CEBA loan, you can pay it now or wait until closer to the December 31st deadline to make your repayments. Personally, our preference is to repay it now, so that the risk is less that you spend the funds between now and December 31st, and risk not having the money to make the required repayment.

And just to reiterate, you do need to repay either $30,000 if you received the initial $40,000; or $40,000 if you received the initial $40,000 plus the additional $20,000. If you are unable to repay these amounts by December 31, 2023, you will need to repay the full amount of the loans. Your inability to repay the $30,000 or $40,000 by December 31st, will change your repayment terms. You will need to repay the full $40,000 or the $60,000 depending on whether or not you took advantage of the second loan.

We also don’t expect any leniency on the amounts that are required to be repaid. In other words, if you owe $40,000 in CEBA repayments and you only have $38,000 available to pay by the end of December, you will be forced to actually repay $60,000 and you will actually be charged interest from January 1, 2024 to December 31, 2025. You will need to work out repayment terms with the financial institution who loaned you the funds.

If you have $37,000 available right now and need to make a repayment of $40,000. Try and budget between now and December 31st to save additionally per month to get you to the required $40,000. This savings of $500 per month will save you $20,000 in cash as well as any interest that you may have to pay.

A couple of items to note:

1) If you are unable to repay the full amount, the loan forgiveness amount that you previously included in your income for your business, can now be a deduction since the loan forgiveness no longer exists.

2) If you didn’t claim the forgiven portion as income in a previous year and you are planning to or have repaid the reduced amount in full, you do need to make an adjustment to your 2021 and 2022 tax returns for the loan forgiveness amount by increasing your income by $10,000 in 2021 if you received the $40,000 loan and $10,000 in 2022 if you received the additional $20,000. (you can’t get something for nothing).