The Newly Expanded CEBA

The $40,000 Canadian Emergency Bank Account (CEBA) has now expanded qualifying criteria beyond payroll requirements. Previously, businesses needed to have 2019 payroll of between $20,000 and $1,500,000 in order to qualify for these interest free loans (originally the range was $50,000 to $1,000,000, which was expanded based on business feedback). Although the program has helped many small businesses, there were still a number that did not qualify. A large segment of small businesses that hire resources as contractors and not T4 employees, as well as businesses where payroll is not their most significant cost category were not eligible.

As of now, businesses eligible for CEBA now include owner-operated small businesses that do not have a payroll, sole proprietors receiving business income directly as well as family-owned corporations that are being paid by dividends (rather than payroll). What is the criteria? You will need to demonstrate having eligible non-deferrable expenses between $40,000 and $1,500,000 in 2020.

What are non-deferrable operating expenses?

Payroll, payments incurred under agreements with independent contractors, license fees, Rent, utilities, insurance, property tax, scheduled principal and interest payments and other operational expenses necessary to conduct business.

With a program like this, it is likely better to understand what is not eligible:

  • Increases in management compensation are not eligible. (Not the time to give yourself and your team a raise.)

  • Dividend payments are not eligible.

  • Prepayment and refinancing of existing debt is not eligible.

Essentially, if you have status quo costs of doing business in 2020 that range between $40k and $1.5M then you may now be considered eligible.

What is required to apply?

In order to complete your application with your financial institution you’ll need electronic or paper copies of receipts/invoices/agreements to be uploaded as evidence of your 2020 eligible non-deferrable expenses.

Is there a catch?

Businesses who have been operating out of a personal bank account are not eligible for this program. Only business accounts that were opened on or prior to March 1, 2020 and are in good standing with the bank (not in arrears on existing borrowing facilities by 90 days or more) are eligible.

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