I Missed the Deadline for my CEBA Loan. What Are my Options?

As an SME owner, you benefited from the Canada Emergency Business Account (CEBA) during the pandemic. You were required to pay off your debt by January 18, 2024 but due to a lack of funds, you were unable to. What are your options?

In short

Here are the options available to you if you were unable to repay your CEBA loan:

Contact your financial institution

As of January 19, interest at a rate of 5% applies to amounts that are past due.
If you submitted a refinancing application, you can benefit from a grace period until March 28, 2024.

  • If you were unable to repay your loan before January 18 or are unable to do so by March 28: Your CEBA loan will be converted into a three-year term loan which must be repaid by December 31, 2026.
  • If your business was considered ineligible under the CEBA program: As of January 19, 2024, you must pay 5% interest on the total loan amount. The CRA will contact you in spring 2024 to reach a payment agreement.

Consider filing a consumer proposal

By negotiating with your creditors, you can reduce the amount of your debts and/or extend your repayment period.

Find out more about commercial bankruptcy

Bankruptcy releases the company from any proceedings against it and all operations are ceased. Once you file for bankruptcy, you can start afresh.

During the COVID-19 pandemic, the Canadian government created the  Canada Emergency Business Account to support businesses through interest-free loans of up to $60,000. Thousands of SME owners across Canada benefited from the program. The repayment deadline for this financial support was pushed back twice until a final deadline on January 18, 2024.

If you had been able to repay your loan before this date, you would have benefited from a non-refundable subsidy of up to $20,000.

If, like many entrepreneurs, you were unable to repay this loan, here is what you can do.

1. Contact your financial institution

Under the CEBA program, interest at a rate of 5% applies to amounts that are past due, including the subsidy portion, as of January 19, 2024. You must take action! Contact your financial institution as soon as possible to find out if you can refinance your loan and restructure your debt. Indeed, if you already submitted an application to refinance your loan, you can benefit from a grace period until March 28, 2024. If you can secure refinancing before this date, you can also take advantage of the subsidy portion of up to $20,000.

If you have a good credit rating, your financial institution may be willing to grant you a refinancing plan. However, you must ensure that you analyze your business’s financial situation and how this new payment would impact your liquidity. List all your expenses and see if you can afford additional payments. In certain circumstances, refinancing may be accompanied by an administrator’s bond. Be careful when entering into such an agreement as you could be personally liable for the debt.

In all cases, if you secure refinancing, you should get support from a lawyer. They can ensure that the contract is suited to your needs.

  • If you were unable to repay your loan before January 18, 2024 or are unable to do so by March 28, 2024:

Your CEBA loan will be converted into a three-year term loan which must be repaid by December 31, 2026. You can pay only the 5% monthly interest on the total balance (including the subsidy portion which you will no longer be entitled to).

If you are unable to pay the monthly interest or the balance of your loan by December 31, 2026, your financial institution will seek to collect your loan balance. After several unsuccessful attempts, it will transfer your loan to the CRA, which will propose a payment arrangement.

  • If your business was considered ineligible under the CEBA program:

You had until December 31, 2023 to repay your loan in full. As of January 19, 2024, you must pay 5% interest on the total loan amount (including the subsidy portion).

The CRA will contact ineligible companies in spring 2024. Payment agreements will be negotiated on a case-by-case basis. You will not incur penalties and repayments must be made over a two-year period.

2. Consider filing a consumer proposal

If you believe you’ll be unable to repay your loan even if the deadline is extended, consider filing a consumer proposal. This involves negotiating with your creditors to reduce the amount of your debts and/or extend the repayment period. A consumer proposal allows you to avoid bankruptcy and continue your activities. Contact a Raymond Chabot licensed insolvency trustee who can help you assess your company’s financial situation and determine whether a consumer proposal is an option for you. They can enter into the arrangement on your behalf.

3. Find out more about commercial bankruptcy

Bankruptcy is a last resort, but it’s sometimes unavoidable. You will have to shut down your company’s operations. Only licensed insolvency trustees have the authority to file for commercial bankruptcy. Contact one of our insolvency experts and this trusted partner will support you and help you get back on track.

In short, if you were unable to repay your CEBA loan, contact one of our licensed insolvency trustees today. They can help you find solutions. The first consultation is free, confidential and judgment-free.

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