The Canadian government’s CEBA (Canada Emergency Business Account) program has been a crucial lifeline for countless small and medium-sized businesses (SMBs) grappling with the economic impact of the COVID-19 pandemic. In 2023, the government introduced significant changes to CEBA repayment deadlines, offering businesses more flexibility in their loan repayment schedules. This extended deadline grants businesses additional time to explore CEBA refinancing options, making it essential for business owners to understand the process and make informed decisions that align with their unique circumstances.
In this comprehensive guide, we’ll explore the timeline for CEBA loan refinancing, the criteria financial institutions use to determine eligibility, and how banks and credit unions are participating in CEBA refinancing. We’ll also provide an overview of select financial institutions’ approaches to helping their customers navigate CEBA repayment and refinancing, with a particular focus on credit unions and major banks.
Timeline for CEBA Loan Refinancing
The Canadian government’s announcement in mid-September 2023 introduced a crucial shift in CEBA loan repayment timelines. This change was eagerly awaited by many borrowers, as it extended the CEBA loan repayment deadline from December 31, 2023, to January 18, 2024. Although this extension might appear relatively short, it has substantial implications for businesses seeking refinancing options, providing them with valuable breathing room.
What’s even more beneficial is that businesses can apply for a refinanced CEBA loan at any time before January 18, 2024. Whether their loan application is approved or denied before March 28, 2024, the repayment deadline for CEBA loan forgiveness automatically extends to March 28, 2024. This extension provides businesses with a crucial window of opportunity to explore CEBA refinancing alternatives.
How Financial Institutions Determine Eligibility for CEBA Loan Refinancing
The eligibility criteria for CEBA loan refinancing vary based on individual financial situations. CEBA loans were originally distributed by financial institutions on behalf of the federal government as part of COVID-19 relief measures. Unlike traditional lending, these loans did not undergo creditworthiness checks, revenue history assessments, or credit score evaluations before being granted to businesses. Instead, the government streamlined the process to expedite funds distribution through existing financial institutions.
This unique approach meant that even businesses with poor credit or those that wouldn’t typically qualify for a credit facility had access to CEBA loans. The federal government, taking on the risk of repayment for CEBA loans, used banks and credit unions as conduits for the program’s execution. Consequently, financial institutions are now tasked with underwriting CEBA refinancing loans, adhering to potentially stricter guidelines.
Major Banks and Credit Unions Refinancing CEBA Loans
Now, let’s delve into how major banks and credit unions are participating in CEBA loan refinancing and the strategies they employ to assist their customers.
Credit Unions Refinancing CEBA Loans:
Meridian Credit Union: Meridian Credit Union offers one of the most competitive CEBA refinancing programs. It provides up to $40,000 at a rate of prime plus 1.25%, with a repayment period of 36 months. The interest rate, based on the prime rate, is currently 8.45%. Meridian assesses eligibility by requiring applicants to complete a personal net worth statement to determine their qualification for a loan. Personal credit plays a significant role in underwriting and approving business loans at Meridian.
Vancity: Vancity assists its clients in planning recurring payments to repay their CEBA loans, providing valuable guidance through an infographic. For clients unable to meet the CEBA forgiveness criteria, Vancity offers loan options to help them. Clients can reach out to a Vancity advisory, branch staff, or call 604-877-7000 for assistance through the Vancity Member Service Centre.
Coast Capital: Coast Capital offers a dedicated webpage for clients to access a variety of CEBA loan repayment options. Clients interested in CEBA refinancing can reach out to their Coast Capital business banking team online or by phone to discuss their needs.
Other Credit Unions: If you bank with another credit union, it’s highly likely they offer CEBA refinancing options. It’s crucial to contact your credit union to establish a repayment plan for your CEBA loan.
Major Banks Refinancing CEBA Loans:
Royal Bank of Canada (RBC): RBC has actively engaged with its customers, encouraging them to consult their account managers regarding CEBA loan repayment. RBC offers a portal for customers to request a CEBA refinancing loan, making it a straightforward process. If businesses face challenges in repaying their CEBA loans or believe additional cash flow could be beneficial, they can apply for a CEBA extension loan through the RBC portal.
Toronto-Dominion Bank (TD): TD extends CEBA refinancing to its customers through its app or website, with branch visits or calls to account managers also welcome. The terms of TD’s CEBA refinancing align with those of other banks, featuring a loan payable by December 31, 2026, and an interest rate in the low double-digits range.
Canadian Imperial Bank of Commerce (CIBC): CIBC simplifies CEBA loan repayment with a link on its website. The bank provides step-by-step instructions for loan repayment and encourages businesses to consult their advisors for a full understanding of their options. CIBC also offers to refinance CEBA loans for its customers.
Bank of Nova Scotia (Scotiabank): Scotiabank offers a straightforward method for repaying CEBA loans through bill payments to ScotiaLine for Business VISA. For those unable to repay the full loan amount before January 18, 2024, Scotiabank advisors work with businesses to determine eligibility for CEBA refinancing. Scotiabank’s rates and terms align with those of other major banks.
Bank of Montreal (BMO): BMO actively collaborates with its customers to refinance CEBA loans. It offers a Credit Line of Business with rates ranging from prime plus 2% to prime plus 11%. Effectively, this translates to interest rates between 9.2% and 18.2%, catering to a wide range of credit scores. Considering the $20,000 loan forgiveness portion, even a higher rate can provide long-term benefits, depending on individual circumstances.
National Bank of Canada (National): National Bank provides multiple options for CEBA loan repayment and assists customers with CEBA refinancing. Instructions for loan repayment can be found on its website. Businesses can speak with an advisor at the bank to assess their eligibility for CEBA refinancing. National also offers a dedicated CEBA support team reachable at [email protected].
Defaulting on CEBA Loan Repayment
Defaulting on a loan, including a government-backed initiative like CEBA, can have severe consequences for both credit scores and businesses. If a business fails to repay the CEBA loan, refinance through its financial institution, or secure financing from alternative lenders, the only remaining option is to continue with the CEBA loan after January 18, 2024 (or March 28, depending on the application status).