The expanded CEBA program is being made available gradually starting with the larger banks. Other participating financial institutions will start offering the program over the coming weeks.
The Canada Emergency Business Account (CEBA) was previously introduced in early April 2020 to provide eligible businesses with financing up to $40,000, with 25 per cent of this being forgivable based on the terms of the CEBA loan program. In the early stages of the program, businesses were required to employ individuals with an aggregate employment expense between $50,000 and $1,000,000 in 2019. The program was modified to widen the employment scope to between $20,000 and $1,500,000, thus expanding the reach of the program.
Even with this expanded reach, some owner-operated small businesses with minimal to no employment expenses still could not meet these criteria and were deemed ineligible. We found that a lot of our farming clients fell in this category as well.
On June 26, 2020, owner-operated small businesses (including farmers) that had been previously ineligible for the CEBA program due to their lack of payroll may now apply under another expansion of the program rules.
To qualify under the expanded eligibility rules, CEBA applicants with payroll lower than $20,000 will need to meet the following additional conditions:
- A business chequing/operating account at a participating financial institution,
- A Canada Revenue Agency business number,
- A 2018 or 2019 filed tax return, and
- Eligible non-deferrable expenses (subject to adjustment) of between $40,000 and $1.5 million.
Those owner-operated small businesses applying under the newly expanded eligibility rules will follow a slightly different process. The applicant will start with the same process of submitting an application to their existing financial institution, but under the expanded eligibility rules the applicant will also be required to submit documentation to the Government of Canada supporting the eligible non-deferrable expenses.
The eligible non-deferrable expense categories are as follows:
- Wages and other employment expenses to independent (arm’s length) third parties,
- Rent or lease payments for real estate or capital equipment used for business purposes,
- Payments for insurance, property taxes, telephone and utilities in the form of gas, oil, electricity, water and internet,
- Payments for regularly scheduled debt service, and
- Payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations or permissions necessary to conduct business by the Borrower.
The 2020 eligible non-deferrable expenses are subject to adjustment if the borrower received benefits under other Government of Canada COVID-19 response programs such as CEWS, CECRA, 10% temporary wage subsidy, Futurpreneur Canada, Northern Business Relief Fund, Fish Harvester Grant, relief measures for Indigenous businesses and $250 million COVID-19 IRAP (Industrial Research Assistance Program) Subsidy Program.
The documentation to be provided supporting the non-deferrable expenses would consist of electronic or paper copies of receipts, invoices or agreements. As long as sufficient documentation has been provided to support the requirement to have between $40,000 and $1.5 million of 2020 eligible non-deferrable expenses, and assuming the pre-funding eligibility validation is successful, the applicant should expect to receive funding within 10-15 business days.
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