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Updated 06.02.2021

Business owners, not-for-profits and many others have spent this last year navigating new, and not so fun, uncharted territory. Luckily, both the provincial and federal governments have installed various programs to support Canadians. One, in particular, we’d like to focus on, is the Canada Emergency Business Account (CEBA).

Applicants now have until June 30, 2021, to apply for a $60,000 CEBA loan or the $20,000 expansion at their financial institution.

The Canadian Emergency Business Account (CEBA):

The Canadian Emergency Business Account (CEBA) provides interest-free loans to small businesses and not-for-profits to mitigate reduced revenue due to COVID-19. A bonus? Eligible applicants could use the funding to cover operating expenses such as rent, payroll, utilities or property taxes.

One of the highlights is the element of loan forgiveness. If you received CEBA funding, this is something you will want to take advantage of!

What is this loan forgiveness?

The loan forgiveness aspect of the CEBA program is one of its top benefits, besides the access to much-needed funds. Double whammy! But, how does loan forgiveness work? Here are two ways to break it down:

  1. If your business borrowed $40,000 or less: repaying your balance on or before December 31, 2022, will result in forgiveness of 25% (up to $10,000). If you borrowed $40,000 and repaid $30,000 by the deadline, your forgivable amount would be $10,000.
  2. If your business borrowed between $40,001-$60,000: repaying your balance on or before December 31, 2022, will result in forgiveness of up to $20,000 based on a blended rate:
  • 25% on the first $40,000; plus
  • 50% on any remaining amounts above $40,000 and up to $60,000.

If you borrowed $60,000 and repaid $40,000 by the deadline, your forgivable amount would be $20,000 ($40,000 x 25% + $20,000 x 50%).

Now, your business may now be generating consistent revenue now that Alberta has eased some public restrictions, however, it may not be back at a pre-COVID level, but looking at how you can start to repay your CEBA loan could help you save money in the long run.

Creating your plan:

Being able to take advantage of CEBA loan forgiveness starts with a plan. Here are some recommendations that will help you prepare for your repayment ahead of time and ideally save over the course of your loan.

  1. Do the math. Math is hard! However, we recommend you calculate how much time is left from now until the December 31, 2022 deadline and determine the weekly or monthly amount you need to set aside to hit the goal of repaying the percentage of the loan required to fit the forgiveness.
  2. Review your cashflow. Evaluate your revenue over the past 3-6 months and make projections for the near future. Then determine how much you can allocate each month towards your CEBA loan repayment. This can be where a business advisor will be a considerable asset!
  3. Set savings aside automatically. Set up pre-authorized contributions to a savings account or an investment product that allows you to access the funds when you need them following the above calculations.
  4. Talk to an expert. Share your plan with your business advisor to discuss how it fits with the existing goals you have for both your business and your personal finances. You never know what added benefits or advantages may present themselves…