What do I need to apply for the Canada Emergency Business Loan?
This is an interest-free loan of up to $40,000 for small businesses that is administered by the banks, and the loans are guaranteed by the federal government. Talk to your banker about this loan application. To qualify, your business will need to show that you paid between $50,000 to $1 million in total payroll in 2019 (this is found on your T4SUM form). We assume there will also be a credit check involved.
The intention of this loan is to help businesses cover their operating costs due to a decline in revenue because of COVID-19. Learn more about the Canada Emergency Business Account. This is a good program for small businesses, but it’s not free money. If your business defaults on the loan, it could possibly transfer to your personal debt to the CRA.
There doesn’t seem to be a requirement to show that your business is struggling because of COVID-19. However, the funds from this loan shall only be used to pay non-deferrable operating expenses of the business, including but not limited to the following:
- Payroll
- Rent, utilities, insurance and property tax
- Regularly scheduled debt payments
The funds may NOT be used to pay down other debt or make payments to owners (e.g. pay dividends or distributions), or increase the compensation of management.