Briefing binder created for the Deputy Minister of Finance on the occasion of his appearance before the Standing Committee on Public Accounts on December 9, 2024 on the Auditor General of Canada's report 8, entitled “Canada Emergency Business Account” - part 2

Overview of the CEBA Program

Issue

CEBA was launched during the COVID-19 pandemic to provide timely financial support to Canadian small businesses and non-profits.

Key points

• The CEBA program provided partially forgivable loans of up to $60,000 to nearly 900,000 Canadian small businesses impacted by COVID-19, amounting to $49.1 billion. CEBA is administered by Export Development Canada (or EDC) via the Canada Account and is delivered in partnership with over 230 financial institutions.
• Program applications were open from April 9, 2020, to June 30, 2021, and the deadline to repay the loan and receive partial forgiveness was January 18, 2024 (or on or before March 28, 2024, for those that applied for refinancing with the financial institution that provided their loan on or before January 18, 2024).
• Loans that were not repaid by the deadline have been converted to three-year loans at a 5% interest rate, and collections activities have begun for those loans that are in default. The final deadline for loan repayment for all remaining loans is December 31, 2026. 
• The CEBA program provided critical and timely financial support, helping to reduce insolvency rates among small and medium-sized businesses during the pandemic.

Background

Originally launched on April 9, 2020, in response to the COVID-19 crisis, CEBA was intended to support businesses by providing financing for their expenses that could not be avoided or deferred as they took steps to safely navigate a period of shutdown, thereby helping to position businesses for successful relaunch when the economy reopened. 

CEBA was designed with three main considerations in mind: 1) speed of deployment; 2) broad but targeted eligibility; and 3) disciplines on risks of inappropriate use and fraud. To achieve speed of deployment, CEBA is delivered in cooperation with the full spectrum of Canadian deposit-taking financial institutions (FIs). In its early phases, CEBA achieved speed of execution by relying on simple rules that allowed for a high degree of automation in loan approvals. 

EDC administers CEBA acting as an agent of the Crown, within the parameters set out in the Ministerial Authorization signed by the Minister of Finance and the Minister for International Trade. Further details on the Canada Account and its governance can be found in Tab 5.

Initially, participating FIs offered CEBA loans to their Canadian clients with a payroll between $50K and $1M according to 2019 tax filings. Borrowers were required to apply through their primary FI and needed to have been operating a business out of a business bank account prior to March 1, 2020. Loans of up to $40,000 were provided and would mature at the end of 2022 with zero interest, subject to an optional 3-year extension at 5 per cent interest per annum, with up to 25% of the loan being forgivable if the balance were to be repaid before 2023.

The program was later expanded to include a broader payroll criterion, other non-deferrable expenses, newer business bank accounts that previously operated out of personal accounts and the loan amount was increased to up to $60,000 with up to $20,000 in forgiveness if repaid by the forgiveness deadline. Key changes are summarized in the table below. These changes were made to: 

• Accommodate the needs of Canadian businesses as more information became available (e.g., expansions of eligibility criteria, expansion of the loan amount, extensions of repayment deadlines, etc.)
• Introduce appropriate checks to ensure compliance with the program rules (e.g., treatment of mis-attestation and potential fraud, exclusion of businesses that received parallel business supports, collections and enforcement strategies, etc.)  

The CEBA program closed to applications on June 30, 2021.

The deadline to repay a CEBA loan for eligible loan holders without any interest and access to forgiveness was ultimately extended to January 18, 2024, after which point all outstanding loans would turn into term loans with an interest rate of 5 per cent per annum starting on January 19, 2024, with the principal due on December 31, 2026.

Additionally, loan holders had the option of a refinancing extension to retain access to forgiveness till March 28, 2024, if they applied for refinancing at the FI holding their CEBA loan by January 18, 2024. 

Loan holders who have defaulted on their payments are in the process of being assigned to the CRA for collections. As of November 19, 2024, CRA has been assigned ~70,000 loans ($3.5 billion). Once assigned to the CRA, the CRA attempts to arrange a lump sum payment or payment plan with the delinquent loan holders to ensure that their CEBA loan is fully repaid. For more information on collections and enforcement, please see Tab 7.

Key stakeholders

Export Development Canada

• Administers the CEBA Program

Department of Finance Canada, Global Affairs Canada

• Provides policy direction
• Provides funding through the Canada Account

Canada Revenue Agency

• Disbursement Phase: Provided inputs to support pre- and postfunding eligibility checks with information on business number, payroll figures, tax return filings
• Collections Phase: Collection services for loans in default

Financial Institutions

• Partnered with EDC to deliver CEBA Program
• FIs enter borrowing relationship with Government of Canada via EDC

CEBA Application Process and Disbursement Flows

CEBA 1.0/2.0 (~76% of loans)

1. Applicants submit their attestation to their financial institution.
2. EDC disburses the requested funding to the financial institution.
3. The financial institution lends the funds to the applicant.

Post Funding:

1. The financial institution submits the applicant's information to EDC.
2. EDC sends the information to CRA and receives eligibility information.

CEBA 3.0+ (~24% of loans)

1. Applicants submit their attestation to their financial institution. Non-deferrable expense stream applicants upload documents directly to the CEBA Program.
2. EDC sends applicant information to CRA and receives eligibility information. EDC conducts internal checks for eligibility as well.
3. EDC disburses the requested funding to the financial institution and informs them of application outcomes.
4. The financial institution lends the funds to approved applicants and notifies declined applicants of decline.