CEBA LOAN BUSINESS CLOSED: THE #1 DRASTIC ULTIMATE CEBA LOAN FORGIVENESS PLAN

ceba loan business closed

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CEBA loan business closed: Program overview

The Canada Emergency Business Account (CEBA) program offered interest-free loans of up to $60,000 to small businesses and not-for-profits. CEBA was available from more than 230 financial institutions across the country.

As of October 26, 2020, eligibility for CEBA was expanded by removing the previous requirement that applicants demonstrate that their business had suffered a revenue loss of at least 15% due to the COVID-19 pandemic.

As of December 4, 2020, CEBA applicants who have been approved are able to receive a $60,000 loan. CEBA applicants who had received the original $40,000 CEBA loan were eligible to apply for the CEBA expansion, which offered businesses an additional $20,000 of financing.

Many businesses in Canada have lost confidence in their financial prospects due to the uncertainty over the fate of the ongoing federal pandemic support, according to the Canadian Federation of Independent Business (CFIB). Many businesses could not survive even with this emergency government support.

I have written several blogs on the CEBA program. The federal government in its budget presented last week is trying to turn the page from COVID relief. However, many businesses still struggle. In this Brandon’s Blog, I look at what it means for the entrepreneur for CEBA loan business closed businesses.

CEBA loan business closed: Eligibility

There were two streams of eligibility for the CEBA application process for a qualifying business:

1. the Payroll Expenses Stream (Applicants with employment income paid in the 2019 calendar year between Cdn.$20,000 and Cdn.$1,500,000); and
2. the Eligible 2020 Non-Deferrable Expense Stream (Applicants with Cdn.$20,000 or less in total payroll expenses paid in the 2019 calendar year).

All Canadian operating business applicants must have satisfied the following requirements:

• An active CRA Business Number (BN) was registered on or before March 1, 2020.
• In order to apply for CEBA, the Borrower must have had an active business chequing/operating account with the business bank lender at the time of application (with an active operating business in operation).
• This business has not used the Canada Emergency Business Account Program (Program) in the past and will not apply for support through the Program at any other financial institution.
• The company plans to keep running its business or start operating again.

If you meet the following criteria then you qualify for the Non-Deferrable Expenses Stream:

• To be eligible for the program, your non-deferrable expenses must fall between CDN$40,000 and CDN$1,500,000. This could include costs such as rent, property taxes, utilities, and insurance. Please note that these expenses are subject to verification and audit by the Government of Canada.
• Filed an income tax return for the 2019 fiscal year, or 2018, if the return for 2019 has not yet been filed.

  

CEBA loan business closed: Are any borrowers excluded from CEBA?

As required by the Government of Canada’s Program, the Borrower confirms that:

1. It is not affiliated with any government organization or body, nor is it an entity wholly owned by a government organization or body.
2. This organization is not a registered charity, non-profit organization, union, or fraternal benefit society or order, nor is it an entity owned by such an organization unless the entity is actively carrying on business in Canada (including a related business in the case of a registered charity) that earns revenue from that business.
3. It is not owned by any Federal Member of Parliament or Senator.
4. It is not a promoter of violence, hateful, or discriminating activities against sex, gender identity or expression, sexual orientation, colour, race, ethnic or national origin, religion, age, or mental or physical disability, according to applicable laws.

CEBA loan business closed: Program repayment deadlines have changed

The CEBA government support program has now been shut down. The application deadline has long passed. The federal government reviewed the original repayment deadline and saw that Canadian businesses were still struggling. So the program repayment deadlines were changed.

The terms of CEBA loans originally required that the outstanding balance (other than the amount eligible for forgiveness) must be repaid by December 31, 2022, in order to be eligible for partial loan forgiveness. The Government of Canada has announced a change to that requirement, and borrowers will now have until December 31, 2023, to repay the outstanding balance net of the amount forgiven.

As there are no payments due as of December 31, 2022, as long as your business is continuing to operate, your business CEBA loan is in good standing. Conversely, a CEBA loan business closed is not in good standing.

CEBA loan business closed: What are the terms of the forgiveness?

CEBA loans are partially forgivable loans concerning principal repayments. Originally the loan program offered a loan of $40,000 assistance for businesses. The program was then amended to provide for an additional loan of $20,000.

As long as your company meets the CEBA eligibility criteria, it will have the following key features of forgiveness:

• If your business borrowed $40,000 or less, you may be eligible for forgiveness of up to $10,000. To receive forgiveness, you must repay the outstanding balance of the loan (other than the amount available to be forgiven) on or before December 31, 2023.
• If your company borrowed between $40K and $60K, the remaining balance of the loan (excluding the amount available for forgiveness) is repaid by December 31, 2023, a single tranche of loan forgiveness up to $20,000 will be issued. The amount of forgiveness will be calculated as follows:

• 25 percent of the first $40,000; plus
• 50 percent of any amount above $40,000, up to $60,000.

CEBA loan business closed: Small business bankruptcies on the rise

The number of insolvencies filed by medium businesses and owner-operated small businesses in the fourth quarter of 2021 was 9.7% higher than in the fourth quarter of 2020 and 36.8% higher than in the third quarter of 2021. These filings were either restructuring proposals or liquidation bankruptcies under the Bankruptcy and Insolvency Act (Canada) (BIA).

During the same time period, the number of large company restructurings under the federal Companies’ Creditors Arrangement Act (CCAA) has decreased. This suggests that small business insolvency filings are increasing.

Over the last two years, government support programs have helped eligible Canadians and Canadian eligible businesses. Therefore there was a reduction in consumer and business bankruptcies. However, now that the support has ended, Canadians and their businesses will have to deal with and fix the underlying problems they face.

CEBA loan business closed: Considering closing your business?

From time to time I’ve spoken to entrepreneurs who applied and received the $60K CEBA loan, only to still not have sufficient confidence in their business’s financial prospects in this challenging time. The company is in financial trouble. These business owners are wondering what will happen if they have an outstanding CEBA loan and they have a business closure. What happens if business operations shut down?

If you have a CEBA loan business closed, that is a default under the loan agreement. A CEBA loan is a loan that does not require collateral from the borrower. The lender does not take security against the company’s assets as a condition of making the loan advance. Even though the language in the loan document may be unclear, if the CEBA loan borrower is an incorporated company, there were no personal guarantees required from the owners.

However, other creditors may have a personal guarantee either because the entrepreneur was required to give it, or it is a liability that attracts personal liability for the Directors of the company. Normal examples of such personal liability are:

• other bank loans from the same or other banks;
• the commercial landlord for the premises lease;
• unremitted source deductions or HST; and
• unpaid wages and vacation pay for employees.

It’s crucial that you consider all the risks before making any decisions to close your business. Seek professional guidance from an Insolvency Trustee (Trustee) to get an accurate assessment of your circumstances and learn what the best way is to safeguard your remaining finances.

CEBA loan business closed: Two options for small business in financial distress

A restructuring proposal under the BIA may be a good option for your business if it is viable but insolvent. With a viable core business, the unprofitable parts can be cut away so that the business can once again generate a positive cash flow. The benefit is that management never has to stop operating the business and you remain in control. The business avoids bankruptcy.

If the company is not viable and is insolvent, it is not worth it to keep funding it from personal resources, as it will only result in more money being lost from insufficient business income to cover all the operating expenses. Corporate bankruptcy is the legal process governed by the BIA and administered by a Trustee.

In a business bankruptcy, the Trustee is responsible for overseeing the process. The Trustee seizes the business assets and sells them. The resulting proceeds (minus any claims by secured creditors or trust claimants) are used to cover the cost of bankruptcy administration and make a distribution to the unsecured creditors.

CEBA loan business closed: CEBA and CERB loans can be included in bankruptcy

The Canadian government’s COVID-19 Economic Response Plan (CERP) provided much-needed financial assistance to many businesses, including family-owned corporations, in the form of interest-free loans. The federal government also helped Canadians through other now-closed programs. There was an array of government support.

Some people who received CERP benefits were ineligible, overpaid, or found themselves owing taxes through no fault of their own. Likewise, many businesses that received government assistance through the CEBA loan and other programs cannot continue. In spite of their owners’ hard work, many businesses now have numerous debts, including a CEBA loan for a closed business.

If your or your company has a liability from one of the government response programs, including tax obligations or from a different contractual obligation, those liabilities can be discharged through a successful restructuring proposal, consumer proposal or bankruptcy under the BIA.

CEBA loan business closed: Summary

I hope you enjoyed this CEBA loan business closed Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

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That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

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