CEBA stands for Canada Emergency Business Account and it has created a big buzz around business owners. Note that the deadline to apply is August 31st, 2020. Supporting documentation can be uploaded by September 3rd, 2020.
What is CEBA?
*It is a loan. It can be arranged through the financial institution where the business has a bank account for at least the last 3 months;
Loan can go up to $40,000;
Can be interest-free if the loan is paid back by Dec 31, 2022;
Up to $10,000 of this loan (or 25% of the loan, whatever is less) will be forgiven if paid within the deadline;
After December 31, 2022, any outstanding balance will be converted into a non‑revolving 5‑year term loan maturing on December 31, 2025, at five percent interest rate;
Only one loan can be taken per Business Number
What businesses can apply?
Businesses (sole proprietorships, partnerships, corporations) that had a CRA payroll account number with a minimum of $20K of payroll expenses in 2019. Applicants provide the total amount paid in payroll (based on the T4 Summary of Remuneration Paid form)
Sole Proprietorships that do NOT have an active payroll account with CRA and/or pay their employees via Dividends.
What type of expenses can be the CEBA loan used for?
CEBA funds can ONLY be used for non-deferrable expenses incurred (or billed to the business) after January 1st, 2020 and to be incurred before December 31st, 2020. Here the list of the allowed expenses:
Wages and other employment expenses to independent (arm’s length) third parties;
Rent or lease payments for real estate used for business purposes;
Rent or lease payments for capital equipment used for business purposes;
Telephone and utilities in the form of gas, oil, electricity, water, and internet;
Regularly scheduled debt service;
Independent contractors and fees required to maintain licenses, authorizations or permissions necessary to conduct business by the Borrower
Does CRA have plans to audit businesses that accessed CEBA – specifically on how businesses used these funds?
We do not have details at this point. However, we advise that you have the following prepared:
Your business 2019 T4 Summary of Remuneration form;
A CEBA Payable Account in your accounting software. This account will reflect your loan draws into the business chequing account;
A CEBA Spending Account in your accounting software. This account will be created as a subaccount to your chequing Account. This account will show that the business paid non-deferrable expenses with the CEBA loan
Other helpful links:
If you are unsure on how to proceed with your CEBA loan, feel free to reach us!