Having trouble keeping up with all the changes announced by the federal government when it comes to their COVID-19 economic response plan? Our Chestermere financial experts and Chartered Professional Accountants has been keeping track of all the latest developments, and sends his latest dispatch chronicling the expansion of the eligibility criteria for the Canada Emergency Business Account (CEBA).
Justin Trudeau’s Liberal government has announced they’re expanding the eligibility criteria for the Canada Emergency Business Account (CEBA) to include many owner-operated small businesses. The feds are framing this announcement as providing further protection to the middle class, while also supporting small businesses by safeguarding the jobs Canadians rely upon. But what exactly does it mean for you? And how can it help during these tough and uncertain economic times? We’ll take a closer look at the answers to both of those questions in this week’s article.
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What is CEBA?
The Canada Emergency Business Account (CEBA) was launched on April 9, 2020. CEBA provides zero-interest, partially forgivable loans up to $40,000 to smaller businesses who have seen their revenues diminish due to COVID-19. These eligible small businesses still face ongoing costs which cannot be deferred, such as rent, utilities, taxes, insurance, and employment costs. If repaid by December 31, 2020, 25 per cent of the loan is forgivable. CEBA is being administered by Export Development Canada, who is working closely with Canadian financial institutions to get the loans into the hands of their existing business banking clients. Since being launched, CEBA has seen more than 600,000 loans be approved for a total of $24 billion in credit.
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What are the new changes to CEBA?
The latest changes to the CEBA will see its eligibility criteria expanded to include more small business owners, most notably those who are operating as sole proprietors. Originally, the CEBA was available to employers or businesses that had a 2019 payroll of between $50,000 and $1 million. Now it’s been expanded to include companies with 2019 payrolls of between $20,000 and $1.5 million.
According to the federal government, these owner-operated small businesses that initially fell below the threshold will now be able to benefit from access to interest free loans, which can be used to help cover their costs as their revenues decline sharply due to the current pandemic. By expanding the eligibility criteria, the feds say the program will now be available to more businesses who operate as sole proprietors and receive their income directly from their business, along with businesses who rely on contractors, and those that are family-owned corporations which pay employees through dividends instead of payroll.
Can I use CEBA if my payroll is below $20,000?
In addition to expanding the eligibility criteria for the CEBA, the federal government has also announced a way for employers with a payroll of below $20,000 to access the interest free loans. In order to do so, they must:
- Have a business operating account at a participating financial institution
- Have filed a 2018 or 2019 tax return and possess a Canada Revenue Agency business number
- Have eligible non-deferral expenses such as rent, property taxes, or insurance between $40,000 and $1.5 million
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How do I apply for the CEBA?
If your financial institution hasn’t already reached out to you about accessing the CEBA, be sure to give them a call as soon as possible and tell them you would like to apply for the program. With more businesses now eligible, it’s important to see whether your company can now benefit from these interest free loans during the pandemic.
IAPC has you covered
If you’re concerned about the state of your business finances or taxes in light of the ongoing pandemic, book a free consultation with one of our trusted Chartered Professional Accountants today and let us help guide you through this uncertain economic time.
