CEBA Repayment Deadline Ahead

The Canada Emergency Benefit Account (CEBA) provided two loans to businesses; one for $40,000; the second for $20,000.  In each case up to $10,000 is forgivable, as long as the balance is repaid on December 31, 2022. This date was extended until December 31, 2023 as of January 12, 2022.  The term of the loan remains at 5 years, which means repayment must occur by 2025. Here’s what tax and financial services professionals need to know when discussing with SME clients.

Opportunity:  The forgivable amount will be considered to be business income in the year that the loan is received. Note that if the loan is not repaid by December 31, there is no forgiveness and the prior filed tax return can be adjusted to remove the income included in the year the loan was received.  The tax savings can help to pay back the loan.

Characteristics of Recipients.  According to a government report entitled SME Profile: Recipients of the Canada Emergency Business Account:

• 53.2% of CEBA recipients were micro-sized, having between 1 and 4 employees.
• 38% of the CEBA recipients were small-sized, having between 5 and 19 employee
• 8% of CEBA recipients had 20 or more employees

Businesses that received CEBA loans reported average reported annual growth in their previous three years of operation (from 2018 to 2020) that was similar to that of all SMEs. 

• 38% of CEBA SMEs reported zero or negative average annual growth in sales or revenue
• 55.3% reported 1 to 20%
• 6.8% report growth of 20% or more.

In 2020, expectations for growth and expansion plans were 80% for CEBA SMEs and 76.8% for all SMEs.

Top Three Obstacles to Growth?  According to this report, the top three major obstacles to business growth in 2020 reported by CEBA SMEs are shown below:

• rising input costs
• recruiting and retaining skilled employees
• shortage of labour

Interestingly, obtaining financing was the least reported major obstacle for both CEBA SMEs and all SMEs (9.5% and 11.2%, respectively).

For more details on CEBA and other essential strategies to prepare for audit season, join us at the September 20, 2023 Virtual CE Summit.