As we previously communicated, applications for the additional $20,000 CEBA loan are now open. We have just received new information on the application forms of some financial institutions and there are significant changes and additions when compared to the original $40,000 loan application. These include more stringent requirements that may be of concern to you.
For instance, in the new application, you must attest the following:
- "Your business is facing ongoing financial hardship (including, for example, a continued decline in revenue or cash reserves, or an increase in operating costs) as a result of the COVID-19 pandemic." Beyond this, the agreement does not define what constitutes 'financial hardship' and whether your business' circumstances make it eligible for the CEBA.
- "In response to the COVID-19 pandemic you have made all reasonable efforts to reduce your costs and to otherwise adapt your business to improve your viability."
- "The funds shall only be used for 'eligible non-deferrable expenses'". This is a defined term and includes limited types of expenses.
- "You will not use any loan received under the Program to make any payment or pay any expense other than Eligible Non-Deferrable Expenses. Specifically, you will not use any loan received under the Program to make any prepayment/refinancing of existing indebtedness, any payment of dividends, distributions or increases in management compensation or to increase the compensation of related parties."
- You have not already received certain other equivalent funding, such as from the Regional Relief and Recovery Fund.
The agreement also informs you that your business name may be published on a Government of Canada website if you receive the CEBA, and that any breach of or inaccuracy in any statement or information provided to the financial institution or the government shall result in ineligibility under the CEBA, trigger an immediate obligation to repay to any loan(s) made to you under the CEBA, and could result in the criminal prosecution, including fines and imprisonment.
Applying for the $20,000 expansion would appear to make all of these terms applicable to the original $40,000 loan as well. Prior to applying for the CEBA, we recommend you review the agreement with your financial institution carefully and follow up with them on any questions you may have.