Article Written by: Trevor Thomas

As you’ve likely already heard, the Canadian Federal government has earmarked $65 billion for businesses that have been affected by COVID-19. The funds are accessible through three credit programs:

1. Canada Emergency Business Account (“CEBA”);
2. Small and Medium-Sized Enterprises Loan and Guarantee Program; and
3. Business Development Bank Co-Lending Program.


The CEBA provides interest-free loans of up to $40,000. These loans are provided through financial institutions (such as Royal Bank, TD Canada Trust, etc.), but are backed by the Federal government. If the loan is fully repaid by December 31, 2022, then up to $10,000 of the loan will be forgiven. If the loan is not repaid in full by December 31, 2020, the loan will be converted into a 3-year term loan at an interest rate of 5%.

The loan can only be used for specific purposes, including to pay non-deferrable operating expenses, such as payroll, rent, utilities, insurance, property tax and regularly scheduled debt service. The loan cannot be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

To be eligible for the loan, the borrower must:

  • Be a Canadian-operating business in operation as of March 1, 2020;

  • Have a federal tax registration;

  • Have had a total payroll in 2019 between 50,000 and $1,000,000;

  • Have an active business chequing/operating account with the lending financial institution (the account must have been opened on or prior to March 1, 2020 and was not in arrears on existing borrowing facilities with the lender by 90 days or more as at March 1, 2020);

  • Apply for the program only at one financial institution;

  • Acknowledge its intention to continue to operate its business or to resume operations; and

  • Agree to participate in post-funding surveys conducted by the Government of Canada or any of its agents.

The application process requires that the business apply online through the financial institution that holds its primary business operating account. The applicant will be required to demonstrate their payroll amount by submitting a T4SUM (issued by CRA).


Despite the good intentions of the program, it does have its drawbacks. Small businesses may not meet the minimum $50,000 payroll threshold. This is particularly true if the business pays the owner (and perhaps the owner’s family members) through dividends rather than a salary. Other micro-sized and new businesses may also be ineligible based on the minimum payment threshold.

The Federal government acknowledges that the program is not perfect, and it will continue to evolve. Changes to the program could include reducing the minimum payroll threshold or providing grants for businesses that don’t qualify, and ensuring that all financial institutions (credit unions, for example) can participate in the program.

The impact of programs such as CEBA is significant; micro-sized and small businesses are the anchors of our communities. While they serve a practical purpose by providing a product/service, and serve an economic purpose by contributing financially to the provincial economy, their real value is bringing people together to engage in fundamental aspects of human life: forming connections and sharing experiences.

NOT LEGAL ADVICE. Information provided by Kent Employment Law or made available on the Kent Employment Law website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action, based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. One of our lawyers would be pleased to discuss any specific legal concerns you may have.

Thank you to our friends at Kent Law for contributing this article. If you have questions or would like to talk to an expert about how this may affect your Canadian business during the COVID-19 pandemic, please reach out to Kent Law by clicking here.

About Kent Law


Kent Employment Law is an employment law firm with offices in Vancouver, Kelowna, Surrey and Victoria. We advise employers and employees throughout British Columbia on all employment-related legal matters, including employee contracts, wrongful dismissal, severance packages, Employment Standards issues, disability, and workplace harassment and discrimination.

We serve clients from a wide variety of industries and backgrounds, with a specific focus on empowering people and organizations by protecting their legal rights.

Disclaimer: The information provided by Kent Employment Law via happier IT on (the”Site”) [and our mobile application] is for general informational purposes only. All information on the site [and our mobile application] is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information on the Site [or our mobile application].