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Canada Emergency Business Account (CEBA)

Can’t Pay Your CEBA Loan? CEBA Loan Repayment And Forgiveness 

The Canada Emergency Business Account (CEBA) provided a financial lifeline to 898,271 small businesses in Canada during the COVID-19 pandemic. Many of these businesses experienced mandatory closures and reduced revenue due to Covid-19 measures.

Some of these companies might have gone out of business without the economic benefits from this small business loan. The Canada Emergency Business Account gave businesses a boost during a difficult time. Unlike the CERB payments, this government program is a loan and must be repaid.

The CEBA Repayment Terms

Initially, small businesses could apply for a CEBA loan of up to $40,000. As the pandemic continued, the government increased the amount your business could qualify for to $60,000. If you had already received the original $40,000, you could apply for an additional $20,000. While only some businesses were eligible for the additional funds, more than 571,000 did receive them.

Repaying the Canada Emergency Business Account

According to changes made by the government, effective September 14, 2023, the CEBA is an interest-free loan for eligible businesses until January 18, 2024. Therefore, you will not be charged interest if you repay your loan by January 18, 2024. Additionally, businesses that repay their loans in full by the due date can qualify for loan forgiveness. Businesses that do not qualify for loan forgiveness must repay their loan by December 31, 2023, to avoid interest charges.

What happens if you still owe money on your CEBA loan on January 19, 2024? In that case, an annual interest rate of 5% will apply, and you must make monthly interest payments calculated on the outstanding balance. You also won’t have any of your loan forgiven. You have to repay the amount you owe by December 31, 2026.

You can repay the amount owing at any time with no penalties. If you have the cash available, you can make payments in installments or pay off the entire amount borrowed in one lump sum. By repaying your principal owing before January 18, 2024, you’ll be eligible for loan forgiveness.

Contact your financial institution if you need help making payments on your CEBA loan. Your lender will give you the information you need to pay down or pay off your loan.

Loan forgiveness

One of the great things about the Canada Emergency Business Account is the potential for loan forgiveness. If you are eligible for loan forgiveness and repay your outstanding principal by January 18, 2024, you can have up to a third of your loan forgiven.

The amount varies depending on how much you borrowed. If you borrowed $40,000 or less, the government will forgive 25% of the loan if you pay off the principal by January 18, 2024. So, if you borrowed $40,000, you’d have to pay back $30,000 instead of $40,000 to qualify for loan forgiveness.

If you borrowed $60,000, you’d still have 25% forgiven on the first $40,000. For the additional $20,000, the government will forgive 50% or up to $10,000. So if you borrowed $60,000 and pay back $40,000 by January 18, 2024, you’ll keep $20,000. While this amount is taxable, it’s still a fantastic benefit that the CEBA offers.

If you apply to refinance your CEBA loan with the financial institution that funded it by January 18, 2024, you are allowed a grace period for repayment up to March 28, 2024. The grace period lets you potentially qualify for partial loan forgiveness. To be eligible, you must repay the amount you owe, less the amount you may be forgiven, plus any interest owing by March 28, 2024.

What Happens if I Can’t Repay the Loan?

Since the government lifted Covid-19 restrictions, many small businesses have returned to pre-pandemic levels. Unfortunately, about 50% have yet to recover. Inflation, labour shortages, online shopping, and supply chain issues have impacted small businesses. Even those businesses that have returned to pre-pandemic levels might need to earn more income to cover all their expenses and repay the CEBA.

Missing the January 18, 2024 deadline

You must repay the principal you owe by January 18, 2024, to avoid interest charges and be eligible for loan forgiveness. If you don’t repay the principal by that date, you must repay the principal amount you borrowed by December 31, 2026. Beginning January 19, 2024, an annual rate of 5% interest will be charged on the loan.

Your financial institution that processed the loan for you will collect payments. Lenders are still determining how they will handle late payments and defaults since the CEBA was a new product. Unlike most bank loans, the government funded these loans, so your financial institution won’t lose money if you don’t pay. However, the Canada Emergency Business Account is still a loan you must repay because:

  1. Your credit score could decline if you don’t repay it.
  2. Borrowing money for your business might be more challenging if you have yet to repay your Canada Emergency Business Account.
  3. The stress of an unpaid loan can impact your health and your business.

Do I need to repay the CEBA if I no longer have my business?

You must still repay the loan if you no longer operate your business. You may have sold or closed your business but must repay your loan. One exception is if your company was incorporated and filed for Bankruptcy. In that case, you’re not liable to repay the loan. However, if you were a sole proprietor or in a partnership, you must repay the CEBA.

What are my options?

If your business isn’t earning enough income to repay the CEBA, or your finances can’t manage the CEBA payments, it’s time to seek professional advice. At Adamson and Associates, our Licensed Insolvency Trustees will work with you to find solutions for your debts.

The Canada Emergency Business Account is an unsecured loan that can be included in a Consumer Proposal or a Bankruptcy. A Consumer Proposal reduces the debt you owe, allows you to keep your assets, and provides a reasonable payment plan to repay your creditors. Filing for Bankruptcy will discharge your unsecured debts, so you won’t have to worry about them anymore.

You don’t need to struggle alone with your debt. Our team at Adamson and Associates will help you get through this situation so you can put your debts behind you and get a fresh start. Please call us today at 519-310-5646 for a free consultation.


John Adamson, Licensed Insolvency Trustee Ontario

John Adamson, CPA, CMA

John is a Licensed Insolvency Trustee (1994), a Chartered Insolvency and Restructuring Professional (CIRP – 1994), and a Chartered Professional Accountant with a Certified Management Accounting designation (CPA, CMA – 1992). His experience includes more than 25 years of helping individuals, small businesses, their owners and even lenders, find solutions to their debt problems.

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