CEBA loan forgiveness - what is it? Can I still benefit? (updated)

Is your business one of the nearly 900,000 SMEs that took out a CEBA loan? If so, you could’ve save up to $20,000 if you repaid or refinanced by January 18, 2024. Although the deadline has passed, there may still be funding opportunities available.

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    Michael David

    Page written by Michael David. Last reviewed on June 10, 2024. Next review due April 1, 2025.

    The Canada Emergency Business Account (CEBA) was set up to help small businesses and not-for-profits get through the pandemic. Qualified applicants received interest-free loans of up to $40,000 and were subsequently able to apply for a CEBA expansion, which increased the maximum loan amount to $60,000. Eligible CEBA borrowers in good standing who repaied or applied to refinance their loan by January 18, 2024 were eligible for loan forgiveness of up to $20,000. So what now that deadline has passed? Keep reading for details.

    After the January 18, 2024 deadline

    If you applied for finance on or before January 18, 2024, with the bank or other financial institution that provided your CEBA loan, you likely qualify for the forgivable extension deadline of March 28 2024. Here are some important details on how this works:

    • Each bank has its own process, check with your bank for details, or get in touch here.
    • If you applied for refinancing with your CEBA loan bank to qualify for the extension, you don’t have to take the finance from your original CEBA provider, and can explore other funding before March 28, 2024.
    • If your original CEBA lender rejected refinancing, you still qualify for the extension if your account is in good standing.
    • You must have the decision from your bank in writing to show your application was dated on or before January 18.
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      Key CEBA loan dates

      December 31 2022

      Original CEBA loan repayment deadline

      December 31 2023

      The CEBA loan extension date was extended by 12 months to the end of 2023. If you have not been contacted by your lender to notify you of partial loan forgiveness, this is still your loan repayment deadline.

      January 18 2024

      CEBA loan repayment deadline (for those eligible for forgiveness). You must have repaid the outstanding principal (minus the potential debt forgiveness), or applied for refinance by this date to benefit from the discount.

      January 19 2024

      From this date any remaining balance owing on your CEBA loan was converted to a non-amortizing term loan at 5% interest.

      March 28 2024

      CEBA loan holders that submit a refinancing loan application to the financial institution that provided their CEBA loan by January 18, 2024 but require a grace period in order to finalize the payout of their CEBA loan can still qualify for partial loan forgiveness if the outstanding principal of their CEBA loan, other than the amount of potential debt forgiveness, plus any applicable interest is repaid by March 28, 2024.

      December 31 2026

      This is the final deadline (for those eligible for forgiveness) to fully repay your CEBA loan .

      December 31 2022

      Original CEBA loan repayment deadline

      December 31 2023

      The CEBA loan extension date was extended by 12 months to the end of 2023. If you have not been contacted by your lender to notify you of partial loan forgiveness, this is still your loan repayment deadline.

      January 18 2024

      Current CEBA loan repayment deadline (for those eligible for forgiveness). Repay the outstanding principal (minus the potential debt forgiveness), or apply for refinance by this date to benefit from the discount.

      January 19 2024

      On this date, any remaining balance owing on your CEBA loan will be converted to a non-amortizing term loan at 5% interest.

      March 28 2024

      CEBA loan holders that submit a refinancing loan application to the financial institution that provided their CEBA loan by January 18, 2024 but require a grace period in order to finalize the payout of their CEBA loan can still qualify for partial loan forgiveness if the outstanding principal of their CEBA loan, other than the amount of potential debt forgiveness, plus any applicable interest is repaid by March 28, 2024.

      December 31 2026

      This is the final deadline (for those eligible for forgiveness) to fully repay your CEBA loan

      What is a CEBA loan?

      The CEBA program offered interest-free loans of up to $60,000 to Canadian small businesses and not-for-profits. It was open for applications from April 9, 2020 to June 30, 2021, and nearly $50 billion was lent to almost 900,000 applicants. CEBA was made available through more than 220 banks, credit unions and other financial institutions across the country.

      The original CEBA loan repayment deadline was December 31, 2022, but this was moved back 12 months to December 31, 2023, and later moved again to January 18, 2024 (for eligible businesses). If a CEBA loan remains outstanding after January 18, 2024, interest payments will be required at a rate of 5% per annum until December 31, 2026, when the full principal repayment will be due.

      Grace period for refinancing: A grace period has been added for those who need extra time to finalize the payout of their CEBA loan. If CEBA loan holders submit a refinancing loan application to the financial institution that provided their CEBA loan by January 18, 2024, they can still qualify for partial loan forgiveness if the outstanding principal of their CEBA loan, other than the amount of potential debt forgiveness, plus any applicable interest is repaid by March 28, 2024.

      What is CEBA loan forgiveness?

      CEBA loan forgiveness makes up to $20,000 of the loan amount forgivable if certain conditions are met. These conditions include the loan being in good standing (i.e. not in default) and the outstanding principal (minus the potential debt forgiveness) being repaid by January 18, 2024, or by March 28, 2024 (plus any applicable interest) if an application for loan financing has been filed with the financial institution that provided the CEBA loan by January 18, 2024.

      The forgivable portion is calculated as follows:

      If you borrowed $40,000 you can receive loan forgiveness of 25%. That means you must repay at least 75% of the outstanding principal by January 18, 2024.  in order to receive loan forgiveness. For example:

      If you borrowedYou must repayTo be forgiven
      $40,000$30,000$10,000

      If you borrowed between $40,000 and $60,000, you can receive loan forgiveness of 25% of the first $40,000 and 50% of the the next $20,000. For example:

      If you borrowedYou must repayTo be forgiven
      $60,000$40,000$20,000

      If you repaid your original $40,000 loan, claimed forgiveness, and later received the $20,000 expansion, the 50% rate applies. That means you can repay $10,000 and be forgiven the remaining $10,000.

      Your bank or financial institution can help you determine exactly how much you’ve borrowed, how much you’ve repaid, and how much more you need to repay in order to claim the forgivable portion of your loan.

      Important: If you have received a notice from your financial institution saying that your business is not eligible for loan forgiveness, then the January 18,
      2024 extension does not apply. Your repayment deadline stays the same, which means you are required to repay your CEBA loan in full by December 31, 2023.

      What does it mean to be in 'good standing'?

      A CEBA loan is in good standing if the borrower has met all of the repayment terms set out by their financial institution. In general, this means that all applicable payments of principle, interest and fees have been made in full and on time. If you have any questions about whether your CEBA loan is in good standing, please contact your financial institution directly.

      How does it work?

      You can think of the CEBA loan forgiveness program as having five phases:

      • December 31 2023 – this is the current CEBA loan repayment deadline for businesses who are not eligible for the January 18, 2024 deadline extension (your lender will have notified you of this).
      • Before January 18, 2024 – this is the current grace period where the interest rate is 0% and no principal repayment is required. During this period, you can make a sufficient repayment or apply for refinancing and benefit from loan forgiveness (eligible businesses only).
      • January 18, 2024 -current CEBA loan repayment deadline (eligible businesses only – again, your lender will have notified you if this is your deadline). Repay the outstanding principal (minus the potential debt forgiveness), or apply for refinance by this date to benefit from the discount.
      • January 19, 2024 – if you’ve not applied for refinancing, any remaining balance owing on your CEBA loan will be converted to a 2-year term loan at 5% interest on this date.
      • March 28, 2024. This is the final day to repay your loan balance to qualify for loan forgiveness if you applied for refinancing by January 18, 2024.
      • December 31, 2026. This is the final deadline to fully repay your CEBA loan

      CEBA loan forgiveness calculator

      Use our handy CEBA loan calculator below to see how much Swoop could help you save on your CEBA loan.

      This calculator is for illustrative purposes only. Specific loan details should be discussed with your CEBA lender directly.

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      How much of a CEBA loan is forgivable?

      The forgivable portion of a CEBA loan is calculated based on two tiers:

      • Loans of $40,000. If you borrowed $40,000 and did not receive a CEBA extension, you can have 25% of your loan forgiven ($10,000).
      • Loans between $40,000 and $60,000. If you borrowed $40,000 initially and received a subsequent CEBA extension, you can have 25% of the initial loan forgiven and 50% of the extension forgiven (total $20,000).

      What are the terms of forgiveness?

      You must pay the remaining principal of your CEBA loan minus the forgivable portion by January 18, 2024 in order to receive loan forgiveness. For example, if you borrowed $60,000, the maximum loan forgiveness amount is $20,000. Therefore, you need to repay $40,000 by January 18, 2024 in order to have the remaining $20,000 forgiven.

      Note on refinancing: There is a grace period for those who apply for loan financing at the financial institution that provided the original CEBA loan. If the application is filed by January 18, 2024, the CEBA loan can still qualify for partial loan forgiveness if the outstanding principal, other than the amount of potential debt forgiveness, plus any applicable interest is repaid by March 28, 2024.

      Example scenarios

      Here are two example scenarios:

      Tom borrowed $40,000 from the CEBA loan program. The maximum loan forgiveness available to him is $10,000 ($40,000 x 25%), which means he needs to repay $30,000 by January 18, 2024 in order to qualify.  He has already repaid $10,000 of the outstanding principal, so he is going to pay the remaining $20,000 by the end of the year using cash flow from his business in order to have $10,000 of his loan forgiven.

      Suzy borrowed $60,000 from the CEBA program. The maximum loan forgiveness available to her is $20,000 ($40,000 x 25% + $20,000 x 50%), which means she needs to repay $40,000 by January 18, 2024 in order to qualify. Since she doesn’t have the cash flow to make this payment, she has decided to refinance her CEBA loan. She’ll use a $40,000 line of credit to pay off her CEBA loan and secure $20,000 in loan forgiveness.

      How do I qualify for forgiveness?

      If you met the eligibility criteria to receive a CEBA loan in the first place, remain in good standing today, and repay the outstanding balance of the loan (other than the amount that can be forgiven), or apply for refinancing on or before January 18, 2024, you will qualify for forgiveness.

      Please note that CEBA eligibility was determined based on the criteria established by the Government of Canada. No bank, credit union or other organization involved in administering the CEBA program has the authority to grant exceptions to these criteria.

      If you have received a notice from your financial institution saying that your business is not eligible for loan forgiveness, then you are still required to repay your CEBA loan in full by December 31, 2023.

      What is the CEBA loan forgiveness deadline?

      The CEBA loan forgiveness deadline is January 18, 2024 (for those businesses notified on this extension date). Otherwise, the December 31, 2023 deadline still applies.

      If pay back on or before January 18, 2024, up to $20,000 of the outstanding balance will be forgiven. After that, the loan will incur a 5% annual interest rate on the full amount borrowed. This interest will be charged monthly beginning on January 19, 2024.

      If you have a CEBA loan and have not made provisions to repay the minimum amount of principal required by the deadline, you might want to consider your refinancing options that could help you secure your loan forgiveness.

      If you apply to refinance your loan with the same financial institution that issued your original loan by January 18, 2024, you can still qualify for partial loan forgiveness as long as the outstanding principal of your CEBA loan, other than the amount of potential debt forgiveness, plus any applicable interest is repaid by March 28, 2024.

      Confused? Register with Swoop and a CEBA refinancing expert will guide you through the relevant steps.

      How can I find out the balance of my loan?

      CEBA loans are administered by banks and credit unions across Canada, and they can provide details regarding your loan balance, outstanding amount that must be repaid, acceptable methods of repayment, and terms of the loan. Some banks allow you to conveniently check your balance and make payments online.

      Is CEBA loan forgiveness taxable?

      Yes, the forgiveness portion of your CEBA loan is taxable. If you have questions about the taxation of your CEBA loan, please contact the Canada Revenue Agency or speak with a professional accountant.

      How do I account for CEBA loan forgiveness?

      Your CEBA loan forgiveness amount should be recorded as income. For example, if you originally borrowed $40,000 and repaid $30,000 in order to secure $10,000 of loan forgiveness, you would have $10,000 of taxable income. For specific advice on how to record this transaction, we recommend seeking the advice of a professional accountant.

      What happens if I can’t pay back my loan by the Jan 18, 2024 deadline?

      If you have failed to comply with any of the repayment terms set out by your financial institution, your CEBA loan may not be in good standing and you may not qualify for loan forgiveness. If this is the case, your bank or credit union will contact you regarding next steps.

      If your CEBA loan is in good standing and you do not repay the required amount of your loan by January 18, 2024, you will not receive forgiveness. During the period of January 19, 2024 to December 31, 2026, you will be required to pay interest on your CEBA loan at a rate of 5% per year. If you have questions about the payment terms after January 18, 2024, please contact your financial institution.

      If you plan to refinance your CEBA loan, you can apply with the same financial
      institution that issued your original loan by January 18, 2024 and unlock a grace period until March 28, 2024 to finalize your financing and qualify for loan forgiveness.

      Can I refinance my CEBA loan?

      Yes, and this could be an effective strategy for those who do not have the capital on hand to secure the forgivable portion of their loan.For example, let’s say you borrowed the maximum amount of $60,000 and have not made any payments yet. You could obtain business financing to repay $40,000 before the deadline of January 18, 2024, and have the remaining $20,000 forgiven. Although there would be interest costs associated with the $40,000 loan, this would likely be more than offset by the $20,000 of loan forgiveness. In addition, you will avoid carrying a balance with the CEBA program, which will begin charging interest of 5% annually, paid monthly starting on January 19, 2024.Speak to a CEBA refinancing expert at Swoop who can guide on your best options

      How Swoop can help

      If you need funding to capture the maximum loan forgiveness, Swoop can help. We will scan the market for the best business finance deals and bring you a list of options in minutes. Sound good? Register with Swoop to discover your options to reduce your CEBA loan amount.

      Written by

      Michael David

      Michael David is a financial writer and former investment advisor. Writing for Capital Group, Dimensional Fund Advisors, Franklin Templeton Investments, HSBC, Invesco, PIMCO, Vanguard, global insurance companies, major banks and others, he has educated professionals, business owners and consumers about strategies for investing, insurance, banking and corporate finance for more than 20 years.

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      Last chance to reduce your CEBA loan

      Is your business one of the nearly 900,000 SMEs that took out a CEBA loan? If so, you could save up to $20,000 if you repay by January 18, 2024.

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