Canada Emergency Business Account $40,000 business loan

mike501 wrote: ↑ I understand the intend of this loan but they should have restrictions to prevent people that doesn't need it to apply.

I had a friend that was bragging in a chat group that he owns a business where it was in the minority business that wasn't affected. In fact, he said he said business was slightly better than pre-pandemic.

He was bragging that he will be eligible for that $40,000 interests free loan and he'll just pay it back before deadline to get the $10k "free". This is absolutely disgusting behaviour and I wish the government would put a restriction to stop this.

My parents said the exact same thing today. They said people are going to abuse it to get free 10k. Plus interest on that 40k. 40k in markets today can easily become 50k+ in 2 years. Pay back 30k. Pocket 20k. Program wasn’t well thought out. Only should provide relief to companies who can show that they were impacted by Covid and thus are eligible to pay back only 30k of the 40k loan.

It goes with EI/CERB as well, people who originally worked once a week/couple hours a week (at their job) when they are ready to go back they won't resume because they'd rather just collect the "free money".

Yeah the decision was made to make it simpler. Sure some people will abuse it but it's not a huge deal in the grand scheme of things. If they are actually cheating there are large penalties written into the law and CRA does have a snitch program so they are taking a risk. I think in OP's case they are eligible. They are getting $10k. Well everyone with a kid is getting money even if they don't need it. It's all stimulus. The no interest part of the loan is really nothing and counting on growing 40k into 50k is a bit naive.

mike501 wrote: ↑ I understand the intend of this loan but they should have restrictions to prevent people that doesn't need it to apply.

I had a friend that was bragging in a chat group that he owns a business where it was in the minority business that wasn't affected. In fact, he said he said business was slightly better than pre-pandemic.

He was bragging that he will be eligible for that $40,000 interests free loan and he'll just pay it back before deadline to get the $10k "free". This is absolutely disgusting behaviour and I wish the government would put a restriction to stop this.

This is the first thing I notice when I read about the business loan. One (I mean if I have a business and I have my own personal savings too) can simple loan the $ and pay back even using his/her own personal saving and get $10K free, it is even better than investing your money at stock market.

But if the idea was for stimulus then why exclude the SB with under $50k in payroll?

If it's a stimulus then more people should be able to benefit from it, something like UBI.

And if it's only trying to help out the ones that need it then there should be restriction and guideline that is intended to go to people that requires it.

In the original case it, it appears they can just get the loan without having to "cheat" the system. I've been against UBI but if the government is just throwing away money and coming up with sub-par programs then might as well do a UBI approach.

This will also save so much admin/audit costs down the road that is a additional waste.

People will always cheat the government and always have. That's why there are strict penalties in place, and those people get punished.

While I think there should have been an extra requirement or validation check added to make sure the business actually needs it, I think it's great the government put speed and accessibility first over extreme diligence to help those who need it the most.

It's not that easy,

From https://cebaquestions.ca/:

Are there any restrictions on how I can use CEBA funds?

The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation,:

• payroll,
• rent,
• utilities,
• insurance,
• property tax and
• regularly scheduled debt service,

and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

superman111 wrote: ↑ It's not that easy,

From https://cebaquestions.ca/:

Are there any restrictions on how I can use CEBA funds?

The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation,:

• payroll,
• rent,
• utilities,
• insurance,
• property tax and
• regularly scheduled debt service,

and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.

I saw that too but even an unaffected/profitable business will have those costs so they can just get the loan and pay for those expenses.

wotai139 wrote: ↑ People will always cheat the government and always have. That's why there are strict penalties in place, and those people get punished.

While I think there should have been an extra requirement or validation check added to make sure the business actually needs it, I think it's great the government put speed and accessibility first over extreme diligence to help those who need it the most.

They don't need to cheat the system, the system ALLOWS those who dont need the funds to get it without breaking the rules.

And why not help the people below $50k payroll expenses?

mike501 wrote: ↑ I understand the intend of this loan but they should have restrictions to prevent people that doesn't need it to apply.

I had a friend that was bragging in a chat group that he owns a business where it was in the minority business that wasn't affected. In fact, he said he said business was slightly better than pre-pandemic.

He was bragging that he will be eligible for that $40,000 interests free loan and he'll just pay it back before deadline to get the $10k "free". This is absolutely disgusting behaviour and I wish the government would put a restriction to stop this.

Its not that easy for your friend to do it. As there is c condition that his/her business have to shows earning decline by 30% (March 2019 vs March 2020) , April 2018 vs April 2020 and so on, as you mention your friend business is doing better now compare to pre-pandemic so he/she will not be qualify.

That condition doesn't apply to the $40,000 loan, only to the wage subsidy.

The goal is to support small business and provide an economic stimulus. This goal will be met whether or not the small business really really really needs the $40k.

If they have money in the bank and use the loan to pay off other expenses (like your friend) then that money in the bank will be spent in different ways which will ideally, at the end of the day, stimulate the economy.

So small businesses/sole proprietorships that make less than $30K a year don't get help? (under this amount GST registration is not required)

Seriously?

"The Borrower has a federal tax registration."

cgtlky wrote: ↑ Its not that easy for your friend to do it. As there is c condition that his/her business have to shows earning decline by 30% (March 2019 vs March 2020) , April 2018 vs April 2020 and so on, as you mention your friend business is doing better now compare to pre-pandemic so he/she will not be qualify.

You are thinking of the other program but I do agree that this loan should have a revenue or some other criteria that shows the business got negatively impacted.

angryaudifanatic wrote: ↑So small businesses/sole proprietorships that make less than $30K a year don't get help? (under this amount GST registration is not required)

Seriously?

"The Borrower has a federal tax registration."

As currently structured yes not eligible as a sole proprietor.

Can you apply for this and CERB at the same time? Anyone know?

This is like usual, right now people are gonna take advantage of it as mentioned above and then the honest businesses that lose their contracts later this year are gonna get shafted.

Sanyo wrote: ↑ Can you apply for this and CERB at the same time? Anyone know?

I’m struggling to find a situation where both would apply. CERB is an individual benefit, so you’d be talking about CEBA for a proprietorship. That is possible, but CEBA is intended so the proprietorship can fund costs of business like payroll, rent, etc..

I guess that’s the angle. CEBA is a loan, not income (which would disqualify you from CERB). You could probably take CEBA and use it to pay rent, utilities, while otherwise idling the business and taking CERB for yourself. Still must be a narrow slice of businesses that are both proprietorship & have $50K-$1MM of T4 payroll.

Mike15 wrote: ↑ I’m struggling to find a situation where both would apply. CERB is an individual benefit, so you’d be talking about CEBA for a proprietorship. That is possible, but CEBA is intended so the proprietorship can fund costs of business like payroll, rent, etc..

I guess that’s the angle. CEBA is a loan, not income (which would disqualify you from CERB). You could probably take CEBA and use it to pay rent, utilities, while otherwise idling the business and taking CERB for yourself. Still must be a narrow slice of businesses that are both proprietorship & have $50K-$1MM of T4 payroll.

disagree...could easily have a small corp with 50-$1m of payroll...if your own salary is typically low, better off taking the CEBA to help cahs flow with rent etc...but stop your own salary and take the CERB instead of the wage subsidy..i have at least one client that fits into this scenario