The federal government has extended deadlines for Canada Emergency Business Account (CEBA) loan repayments, providing an additional year for term loan repayment, and additional flexibilities for loan holders – including travel and tourism businesses – looking to benefit from partial loan forgiveness of up to 33 percent.
The extension has been a key priority for the Canadian Association of Travel Agencies and Travel Advisors (ACTA), which conducted a recent survey that said 67% of its members were not confident about their ability to repay their government loans by the year-end deadline, while another 36% said it was likely or somewhat likely that they could close within the next three years.
ACTA had been conducting a letter-writing campaign, encouraging and helping travel advisors contact their members of parliament to urge a payment deadline extension by two years until 2025 and to modify various repayment terms.
On Sept. 14, with the news arriving during ACTA’s eastern Canada regional summit, a statement from the Department of Finance said the repayment deadline for CEBA loans to qualify for partial loan forgiveness of up to 33% would be extended from Dec. 31, 2023, to Jan. 18, 2024.
ACTA initially welcomed the “helpful” news, with Paradis noting at the Summit that “On Dec. 31, 2023, there are a lot of loans coming due… and we have a cash flow issue in travel agencies and independent travel agent services…”
The move recognizes that “the end of December is a busy time for many Canadian businesses” and builds on the a previous one-year extension announced in January 2022, added the government statement.
Further, for CEBA loan holders who make a refinancing application with the financial institution that provided their CEBA loan by Jan. 18, 2024, the repayment deadline to qualify for partial loan forgiveness now includes a refinancing extension until March 28, 2024.
“This will allow more small businesses and not-for-profits to access relief and give them more time to hear back from their financial institutions on refinancing applications,” said the statement.
Additionally, as of Jan. 19, 2024, outstanding loans, including those that are captured by the refinancing extension, will convert to three-year term loans, subject to interest of 5% per annum, with the term loan repayment date extended by an additional year from Dec. 31, 2025, to Dec. 31, 2026.
“Put simply, small businesses and not-for-profits will automatically have access to a three-year, low-interest loan of up to $60,000 if they have not repaid or refinanced their loan. This will provide those who are unable to secure refinancing or generate enough cashflow to repay their loans by the forgiveness deadline an additional year to continue repayment at a low borrowing cost.”
Repayment on or before the new deadline of Jan. 18, 2024 (or March 28, 2024, if a refinancing application is submitted prior to Jan. 18, 2024, at the financial institution that provided their CEBA loan), will result in loan forgiveness of $10,000 for a $40,000 loan and $20,000 for a $60,000 loan.
Example
The government offered examples of how CEBA loan holders can benefit from new repayment flexibility:
• Sarah and Nick need to pay off their $40,000 CEBA loan but are unable to pay the full amount in time to benefit from $10,000 in partial loan forgiveness. On Jan. 19, 2024, their loan converts to a three-year term loan with 5% interest per year. They will make monthly interest payments of around $167 per month and will only be required to pay their principal amount just before the term loan repayment deadline of Dec. 31, 2026.
• Doug applies for $40,000 in financing from the bank that provided his CEBA loan to pay off his $60,000 CEBA loan. He is unable to receive a response to his refinancing application by Jan. 18, 2024. However, with the new refinancing extension, he has until March 28, 2024, to hear back from his bank and secure new financing to pay off his CEBA loan and benefit from $20,000 in partial loan forgiveness.
The government says financial institutions will contact CEBA loan holders directly regarding their loans. The above changes also apply to CEBA-equivalent lending through the Regional Relief and Recovery Fund.