CEBA Repayments Due Soon to Enable Partial Loan Forgiveness

To receive partial loan forgiveness, CEBA loan repayments are due by December 31, 2023. Any outstanding amounts that remain unpaid will convert to a two-year loan with an annual interest rate of 5%. 

The Canada Emergency Business Account (CEBA) was a COVID support measure which offered interest-free, partially forgivable loans of up to $60,000 for small businesses and not-for-profit organizations. These loans were available for application beginning April 6th, 2020. Following a program update that included an extension and maximum loan amount increase, the CEBA application process was closed on June 30, 2021.

The repayment terms apply irrespective of the loan amount or the date of disbursement. Any balance not repaid by the December 31, 2023 deadline will be restructured into a two-year interest-only loan, with the full amount of the loan principal due on December 31, 2025. Full details can be found on this Government of Canada website.

Partial Loan Forgiveness

If CEBA loans are repaid by the December 31, deadline, partial loan forgiveness will apply, based on the loan amount. For the first $40,000 loan balance, repayment on or before December 31, 2023, will result in forgiveness of 25% (up to $10,000). Additional amounts borrowed between $40,000 and $60,000 are forgivable at 50%. However, regardless of the loan amount, it is considered a single loan with one tranche of forgiveness. Please note that any loan forgiveness from this program is taxable in the year the forgiveness is received.

Examples:

• A company borrowed $40,000 and repaid $30,000 by December 31, 2023. The remaining $10,000 (25% of loan principal) is forgiven and the CEBA loan is considered paid in full.
• A company borrowed $60,000 and repaid $40,000 by December 31, 2023. The remaining $20,000 (33% of loan principal) is forgiven (25% of the first $40,000 and 50% of the second $20,000) and the CEBA loan is considered paid in full.
• A company borrowed $60,000 and repaid $35,000 by December 31, 2023. The remaining $25,000 is converted into a two-year loan requiring only interest payments until the full loan principal is due on December 31, 2025.

For inquiries regarding your CEBA loan balance and repayment details, contact the financial institution that provided the loan. For questions related to tax implications of the CEBA loan forgiveness or other business advisory and accounting topics, reach out to a Bateman MacKay Business Advisor.