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20% of small businesses too small to qualify for CEBA loan: CFIB

Smallest businesses with payrolls under $50,000 are not eligible for the support.

April 14, 2020   by PLANT STAFF

TORONTO — Many small businesses are reporting eligibility requirements for Canada Emergency Business Accounts (CEBA) are shutting them out, according to a survey by the Canadian Federation of Independent Business (CFIB).

“Nearly 80% of small businesses are fully or partially closed due to COVID-19 with little or no revenue coming in, while their bills continue to pile up,” said Dan Kelly, CFIB’s president.

The federal program allows banks to offer a loan of up to $40,000 backed by the federal government with no interest and up to $10,000 forgivable when fully repaid by December 2022. But Kelly said the smallest businesses with payrolls under $50,000 are not eligible for the support.

CFIB notes CEBA loans require a business to have between $50,000 and $1 million in payroll. As many small firms pay the owner and the owner’s family through dividends rather than salary, this test excludes thousands of long-standing firms. Others, including micro-sized business and newer firms, are also finding themselves ineligible for the program.

CFIB recommends the some improvements to CEBA:

  • Eliminate the payroll eligibility to access the loan, particularly the $50,000 minimum.
  • If a payroll test remains, drop the minimum payroll requirement to $10,000 and allow dividends paid to family working in the business to be included.
  • Increase the maximum threshold from $1 million to $2.5 million and/or consider alternative means of assisting firms (such as forgivable loans) that have been completely shut down but require larger amounts of cash to help them with their fixed costs.
  • Ensure all businesses have access regardless of where they bank, including through smaller credit unions
  • Allow businesses to use the loan to access $10,000 as a grant right away to help cover costs, including rent


These preliminary findings are based on 10,620 responses collected from CFIB members to a controlled-access web survey. Responses were received between April 10 and April 13. Margin of error is +/-0.9%, 19 times out of 20.

 


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2 Comments » for 20% of small businesses too small to qualify for CEBA loan: CFIB
  1. Due to the shortage of drivers in the transportation industry many companies have moved from an owner operator model to hiring employee drivers and therefore the payroll has increased substantially and the CEBA program eliminates them. These especially are the Companies that have employees and have to keep going but are eliminated from the help. The bar should be raised to $2,000,000.00 to keep the essential workers going. Also the banks need to waive lease interest on essential equipment for at least 3 months this will allow all the trucking essential services less stress in such a stressful time.

  2. Ambreen Anjum says:

    Hi . I am also a small business owner who started child care centre in May 2019 in Edmonton. Unfortunately I also do not qualify for CEBA loan which I need to keep my business alive in this situation. I feel that as we just started up a new business they should consider that the payroll limit of $50000 is not practically possible for a new small business . As they say CEBA loans are for supporting small businesses but actually it is for supporting well established big businesses which can pay $1 million in payroll. There is no support for business like ours to pay the rent and operating cost. I request the respected concerned authorities to please reconsider this payroll condition .
    Thanks

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