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In the early months of the COVID-19 pandemic, amid a frenzy of spending announcements meant to support people and businesses through the darkest days of the global crisis, the federal government created the Canada Emergency Business Account (CEBA), offering interest-free loans of up to $60,000 to small businesses and not-for-profits.
The goal was to ensure those businesses would have access to enough funds to stay afloat during the pandemic. According to Government of Canada statistics, nearly 900,000 small businesses were approved for a total of $49-billion in CEBA funding before the program was closed on June 30, 2021.
Now, this program is entering its repayment phase.
While the notion of repaying a $60,000 loan by the end of the year might be daunting to most small businesses, the federal government is offering an incentive to pay it off by December 31, 2023. Eligible CEBA borrowers who repay the balance of their loan on or before that date will see up to 33 per cent of their loan forgiven. That equals $20,000 in savings for businesses who accessed the full amount offered - which most did. If the loan remains unpaid at the end of this year, the full $60,000 will become due December 31, 2025 and will incur a five per cent annual interest rate (charged monthly).
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For some small and midsize businesses (SMBs), repaying a CEBA loan with their own cash is possible. Many others, however, may be looking for financing to help cover the loan repayment for now in order to reap the financial rewards of this time sensitive government incentive.
Merchant Growth is a private lender that leverages technology and data science to provide capital to SMBs that aren’t supported by larger lending organizations, like the big banks.
“Smaller businesses are often seen as higher risk to lenders, so it can be more difficult for them to access financing through traditional channels.” says Kevin Clark, Chief Revenue Officer at Merchant Growth.
“Merchant Growth has become an important part of the lending ecosystem now in the Canadian financial services fabric because, over the last 10 to 15 years, we’ve put hundreds of millions of dollars of capital into the hands of small businesses that weren’t available before.”
Clark says businesses who took advantage of the CEBA program really have two economic choices: take the cash they’ve got on hand and pay back the loan, or borrow the funds to repay CEBA before December 31, 2023.
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He points out that, if you borrowed $60,000 and can’t repay the minimum required to pay off the CEBA loan by the end of the year, you’ll forego the forgiveness program and be placed into a term repayment structure by the federal government, which includes an additional $6,000 in interest, bringing the total cost of that CEBA loan to $66,000.
By using Merchant Growth’s Refinance Program, you can take advantage of the federal government’s loan forgiveness offer, paying only $40,000 of your $60,000 CEBA loan. If you throw in the cost of financing (interest rates would depend on your business profile), the total amount of that CEBA loan could be as low as $44,000. “The small business application process is a frictionless experience,” says Clark. “You put in minimal amounts of information and we are able to produce an answer within seconds on whether the business will qualify for financing.”