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Repaying the CEBA: What Are Your Options?

Vente Achat d'entreprises | Raymond Chabot Grant Thornton

Companies only have a few weeks left to repay any financial assistance they obtained through the CEBA. Let’s go over the options.

In the middle of the pandemic, the Canadian government launched the Canadian Emergency Business Account (CEBA), a financial lifeline to support businesses hit by the COVID-19 crisis. More than 750,000 businesses in Canada took advantage of this interest-free loan.

With the January 18, 2024 deadline approaching, the clock is ticking for repayment of this financial assistance. This deadline was originally December 31 2022, then postponed by a year before being pushed back once again to January. So, you only have a few weeks left to decide how to pay off this debt.

Option 1: Pay it back on time

First and foremost, it is essential to assess your company’s financial situation. This assessment must include an analysis of cash flow, income forecasts and operating costs. Use this analysis to determine your ability to repay the loan on time.

Some loans are eligible to retain a portion of the subsidy. Companies that have received the maximum amount, $60,000, can repay only $40,000 of the initial loan, i.e., a $20,000 subsidy. If you can afford to pay it all back early, this is a great opportunity!

If your loan has been deemed ineligible—if this is your case, you would have already received an email notification from your financial institution—you will lose the portion of the loan that was a subsidy and will have to repay the full amount by January18, 2024.

Option 2: Negotiate a repayment plan

By fall 2023, according to CFIB, only 18% of borrowers had successfully repaid their CUEC loans, thereby highlighting the difficulty many companies have had in complying with the program’s terms and conditions.

Companies that fail to pay $40,000 of the $60,000 borrowed by the new due date will lose their subsidy and will have until December 31, 2026 to repay the full $60,000 at 5% interest.

If you are having difficulty paying off this debt, talk to your financial institution as soon as possible. They may offer you options for refinancing or restructuring the debt in return for a guarantee from you. You must reach an agreement by January 18, 2024 (or prove that you are in the process of reaching one by that date).

It will be important to analyze your company’s financial ability and the impact of this new payment on your cash flow. As needed, review your current expenditures and identify areas where savings can be made without compromising your operations. You will also need to determine whether you can incur personal liability in the event of default. Be prepared to adjust your action plan based on changes in the market and your company’s financial situation.

Option 3: No refund

If repayment seems impossible, there are still other solutions available to you. There is the Consumer Proposal, allowing you to negotiate a repayment plan with all your creditors that is tailored to your financial ability, thus offering an alternative to bankruptcy. Sometimes, however, bankruptcy is unavoidable. Although this is an extreme solution, it may be the best choice for some businesses that are unable to overcome their indebtedness.

Don’t hesitate to consult financial and business recovery experts like those at Raymond Chabot. Our professionals can offer you personalized advice and help you navigate the complexities of repaying the CEBA.

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