Starting a Business in Canada

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Apr 22, 2020 - 3 minute read - Comments - government

Canada Emergency Business Account (CEBA)

This $25 billion program provides interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced, due to the economic impacts of the COVID-19 virus.

Eligibility Requirements

  • The Borrower is a Canadian operating business in operation as of March 1, 2020.
  • The Borrower has a federal tax registration.(See our post for an explanation of Business Numbers)
  • The Borrower’s total employment income paid in the 2019 calendar year was between Cdn.$20,000 and Cdn.$1,500,000. This can be found from your T4 Summary (T4SUM). A copy of this is available in the Canada Revenue Agency’s (CRA) My Business Account service.
  • The Borrower has an active business chequing/operating account with the Lender, which is its primary financial institution. This account was opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities, if applicable, with the Lender by 90 days or more as at March 1, 2020. You should apply at the financial institution where your main chequing account is located.
  • The Borrower has not previously used the Program and will not apply for support under the Program at any other financial institution. These are government loans and they will check their records to make sure you’ve applied only once.
  • The Borrower acknowledges its intention to continue to operate its business or to resume operations.
  • The Borrower agrees to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

Ineligible Borrowers

  1. It is not a government organization or body, or an entity owned by a government organization or body;
  2. It is not a union, charitable, religious or fraternal organization or entity owned by such an organization or if it is, it is a registered T2 or T3010 corporation that generates a portion of its revenue from the sales of goods or services;
  3. It is not an entity owned by individual(s) holding political office; and
  4. It does not promote violence, incite hatred or discriminate on the basis of sex, gender, sexual orientation, race, ethnicity, religion, culture, region, education, age or mental or physical disability.

Use of Funds

The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

This means that the funds must be used for normal cash flow purposes. You can’t pay down a lump sum on other debt or pay yourself a dividend from these funds.

If you qualify, this is a program worth participating in. During times like these, you’ll want to keep as much cash on hand as possible. Remember, this is an interest free loan. Also, repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000). If you can’t repay the loan by the end of 2022, your lender will convert the loan into a regular term loan with payments.