CEBA Repayment Considerations

On September 14, 2023, the government outlined a crucial change: by January 18, 2024, any outstanding CEBA loans would convert automatically into a 3-year term loan at 5% interest, forfeiting access to the forgivable portion. Another option is to pay only the interest during the loan term, with a deadline extended until December 31, 2026, for principal repayment.

Businesses aiming to refinance their CEBA loans with the originating financial institution face a deadline of March 28, 2024, to retain the forgivable portion, provided the refinancing application precedes January 18, 2024.

This announcement has left many disappointed due to the absence of an extension to retain the forgivable portion, a crucial concern for numerous small businesses. CFIB continues to advocate for this extension through a new petition, urging signatures and conversations with MPs regarding its impact. However, prudence dictates exploring alternative options should the deadline remain unchanged.

Evaluating these decisions is complex and varies based on individual financial circumstances:

Refinancing Options:

1. 1. Personal Savings: Assess personal savings to repay CEBA, potentially covering part or all of the required funds.
   2. Available Credit: Utilize existing lines of credit, preferable to a loan due to their flexibility in repayment terms.
   3. Family/Friends: Seek support from close contacts, potentially acquiring funds with favorable terms or an equity stake in the business.

Before committing to any financing, scrutinize contracts thoroughly and seek legal advice if necessary. Understanding contract terms is crucial to avoid costly implications or legal entanglements.

Preparation Steps:

1. 1. Financial Statements Analysis: Review balance sheets, income statements, and cash flow statements for a comprehensive overview.
   2. Key Performance Indicators (KPIs): Track relevant KPIs to assess performance and health regularly.
   3. Budget and Forecasting: Project future income, expenses, and cash flow to set financial goals and monitor progress.

Assessing your turnaround plan involves reviewing financial statements, ensuring positive cash flow, forecasting, understanding debt history, and analyzing receivables and other debts’ terms and priorities, including personal guarantees.