Canada Emergency Business Account Update December 8, 2020

As part of its response to the COVID-19 crisis, the Federal government previously implemented the Canada Emergency Business Account (“CEBA”). This program is intended to help small businesses cover costs that cannot be deferred or avoided.

Under the pre-existing CEBA program, the government will guarantee interest-free loans of up to $40,000. Where 75% of the loan is repaid before December 31, 2022, the remaining 25% will be forgiven.

Under the extended CEBA program announced on October 9, 2020, and confirmed on December 4, 2020, the government is now providing additional funding of up to $20,000, 50% of which would be forgiven if the balance is repaid by December 31, 2022. An attestation of the impact of COVID-19 on the business is required to access the additional financing. Financial institutions are now accepting applications for the additional $20,000.

The forgivable loan is taxable to the recipient, generally in the year of receipt. There is a potential election to defer taxation to the subsequent fiscal year, if that is when non-deferrable costs are incurred and it is different from the year of receipt. If the loan is not fully forgiven, a deduction will be available to compensate for previously included income.


The deadline to apply for the full $60,000 CEBA loan, or the $20,000 additional loan, is March 31, 2021.


Businesses are eligible if they fall into one of the two following situations:

  • Payroll Stream: The entity paid employment income during the 2019 calendar year between $20,000 and $1,500,000; or
  • Non-Deferrable Expense Stream: The entity has non-deferrable expenses between $40,000 and $1,500,000. These applicants must have filed a Canadian income tax return for a tax year ending in 2019 (or 2018 if the 2019 tax return has not been filed).

According to the Government of Canada Website ( all eligible non-deferrable expenses must be paid during the period January 1, 2020 to December 31, 2020.

All applicants must:

  • Have a CRA Business Number with an effective registration date of March 1, 2020 or prior.
  • Only apply for the CEBA at one financial institution.
  • Intend to continue to operate the business or resume operations.
  • Have an active business chequing or operating account with a financial institution.

Note: Since October 26, 2020 those businesses that used a personal chequing or operating account for their business transactions are now eligible to apply for CEBA but they must first open a business chequing or operating account.

Application Process

All applicants must apply through the same financial institution with which they have their main business chequing or operating account.

Payroll Stream

The applicant must provide the financial institution the total payroll amount from the entity’s 2019 T4 Summary. The Federal government will assess the application and provide confirmation to the financial institution.

Non-Deferrable Expense Stream

Once the applicant completes the initial application with their financial institution, they are directed to a CEBA website to upload supporting documents for eligible non-deferrable expenses to be paid in 2020. Once the supporting documents are uploaded the Federal government will assess the application and provide confirmation to the financial institution.

The nature of the supporting documents will depend on the type of expenses but will generally be in the form of invoices, receipts, or agreements.

The various eligible non-deferrable expense categories include payments for:

  • Wages and other employment expenses to independent (arm’s length) third parties.
  • Rent or lease of real estate used for business purposes.
  • Rent or lease of capital equipment used for business purposes.
  • Insurance related costs.
  • Property taxes.
  • Telephone and utilities in the form of gas, oil, electricity, water and internet for business purposes.
  • Regularly scheduled debt service.
  • Under agreements with independent contractors and fees required to maintain licenses, authorizations, or permissions necessary to conduct business by the borrower.
  • Materials consumed to produce a product ordinarily offered for sale by the borrower

To determine whether an applicant meets the required threshold for non-deferrable expenses they must reduce the expenses by the amount of funding received from other Federal COVID-related programs (wage subsidy programs, rent relief programs, COVID-19 IRAP etc.)

To assess eligibility there is a Pre-Screen Tool available here

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