Canada Emergency Business Account
Hello and Happy New Year, with an emphasis on ‘happy’! Here at VC Partners, we’re cautiously optimistic that 2021 will be significantly better than 2020 and we are here to help with anything and everything related to your financial and accounting needs. Welcome to the news section of our website. Here is where you will find our most recent articles with pertinent information that we believe you should know. We know navigating the world of government funded programs and loans has been confusing to say the least, and that’s why we’re here to help.
The COVID-19 pandemic has changed the way businesses operate around the world, resulting in many adverse financial consequences. Businesses are continuing to adapt and find ways to manage the new business landscape.
In response to the pandemic, the Federal Government introduced many funding programs, one being the Canada Emergency Business Account (“CEBA”).
The CEBA was first introduced as a $40,000 interest free loan being provided to small businesses and not-for-profits to help pay for operating costs during the pandemic. Repaying the balance of the loan on or before December 31, 2022 would potentially result in loan forgiveness of up to $10K or 25%.
In order to qualify for the funding, businesses were required to have payroll in the 2019 calendar year between $20K and $1.5M. The entities that did not meet the payroll criteria were required to demonstrate having eligible non-deferrable expenses of at least $40K in 2020. A full listing of the non-deferable expense categories can be found on the CEBA website.
As you may have heard, there have been recent changes to the CEBA program.
So what’s new?
As of December 4, 2020, CEBA loans for eligible businesses were increased from $40K to $60K.
Applicants who received the $40K loan may apply for an additional $20K loan.
All new applicants have until March 31, 2021 to apply (for the additional $20K or the entire $60K expansion loan).
Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 33 percent (up to $20K).
What many applicants are not aware of is that the new application requires an amended agreement which may change the eligibility criteria for the original loan/forgiveness. In particular:
1. Applicants are now required to certify that since the beginning of the program, all expenditures for which the funds were used were specifically for non-deferable eligible expenses. This specific wording was not included in the original agreement.
2. New proof is now required to confirm that COVID-19 has negatively affected the business. It will be interesting to see how the Canada Revenue Agency will interpret this criterion. Will they look at a reduction in revenues, a cash flow deficiency, an increase in expenses, a loss in a major customer?
We caution applicants to review the updated agreement and attestation before applying for the expanded CEBA. We anticipate that the generalities used in the criteria may result in significant audit risk.
VC Partners LLP is a boutique accounting, tax, audit and consulting firm, located in the GTA.
For any questions, please reach out to one of our team members.
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