Entrepreneurship & Small Business

TD Bank appears to be making up their own rules for the governments CEBA small business loan.

  • Last Updated:
  • Jun 8th, 2020 7:44 pm
[OP]
Jr. Member
Dec 12, 2005
114 posts
28 upvotes

TD Bank appears to be making up their own rules for the governments CEBA small business loan.

I applied for the CEBA government backed $40,000. loan thru TD Bank.

The Canadian Government's CEBA website make reference to conditions on what the loan monies can be used for such as rent, payroll, utilities etc.

TD Banks deposited the CEBA $40,000. loan directly into my business checking account.

I called up TD business banking service line and I asked how do I start using the loan proceeds?

I was supprised when I was told that the loan monies do not start to advance until all the other funds in my business account have been depleted and my business account is in overdraft. Then the $40,000. loan would start to be drawn on to cover up to the overdraft amount.

That's not my understanding on how the government expects this CEBA loan program to work.

I expected that it should be my decision what to pay using the CEBA loan so as to remain in compliance with what expenses are permitted under the loans program rules.

Why do I care? Apparently the forgiveable 25% portion of the CEBA loan is determined by how much a business has outstanding on their loan at the end of the Initial Term Date of Dec 31, 2022.

My understanding is if you have $40,000 outstanding then your loan forgiveness will be $10,000 (25% of $40,000). If you only have $20,000. outstanding then your loan forgiveness would only be $5,000 (25% of $20,000).
I would have to have a $40,000 overdraft in my business account until Dec 31, 2022 to meet the requirement under the TB Banks current loan rules. A paragraph off of the TB Banks loan agreement is attached.

RBC Bank manages the CEBA loan in a different way. They issue a seperate virtual Visa credit card that a business can draw on while leaving your business banking account separate. A business can just draw on the RBC Visa card until the $40,000. loan is used up and while still leaving your business account with a positive balance to use for expenses that don't qualify under the CEBA program.
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Last edited by regrus on Jun 7th, 2020 8:55 am, edited 4 times in total.
7 replies
Deal Addict
May 12, 2014
2499 posts
2123 upvotes
Montreal
regrus wrote: Why do I care? Apparently the forgiveable 25% portion of the CEBA loan is determined by how much a business has outstanding on their loan at the end of the Initial Term Date of Dec 31, 2022.
Where did you get that from? It's not what is advertised by the government.

https://ceba-cuec.ca/

"Repaying the balance of the loan on or before December 31, 2022 will result in loan forgiveness of 25 percent (up to $10,000)."



Here's one banks actual terms which give greater clarity:
"On December 31, 2022, if you have repaid at least 75% of the January 2021 Amount, and provided that such repayment was not required due to an Event
of Default, the remaining portion of the January 2021 amount will be forgiven. For greater certainty, the maximum amount of your CEBA loan that can be
forgiven is $10,000."


So, to get $10,000 forgiven, you can borrow it all today, make no payments until February 2021, pay $30,000 on Feb 1, 2021. Make no other payments. And so get $10,000 forgiven on Dec. 31, 2022.
Temp. Banned
Apr 5, 2013
4848 posts
1928 upvotes
markham
regrus wrote: I applied for the CEBA government backed $40,000. loan thru TD Bank. The loan was approved and the funds deposited directly into my business account.

The Canadian Government's CEBA website make reference to conditions on what the loan monies can be used for such as rent, payroll, utilities etc.

TD Banks deposited the CEBA $40,000. loan directly into my business checking account.

I called up TD business banking service line and I asked how do I start using the loan proceeds?

I was supprised when I was told that the loan monies do not start to advance until all the other funds in my business account have been depleted and my business account is in overdraft. Then the $40,000. loan would start to be drawn on to cover up to the overdraft amount.
That's not my understanding on how the government expects this CEBA loan program to work.

I expected that it should be my decision what to pay using the CEBA loan so as to remain in compliance with what expenses are permitted under the loans program rules.

Why do I care? Apparently the forgiveable 25% portion of the CEBA loan is determined by how much a business has outstanding on their loan at the end of the Initial Term Date of Dec 31, 2022.

My understanding is if you have $40,000 outstanding then your loan forgiveness will be $10,000 (25% of $40,000). If you only have $20,000. outstanding then your loan forgiveness would only be $5,000 (25% of $20,000).
I would have to have a $40,000 overdraft in my business account until Dec 31, 2022 to meet the requirement under the TB Banks current loan rules. A paragraph off of the TB Banks loan agreement is attached.

RBC Bank manages th CEBA loan different. They issued a seperate virtual Visa credit card that a business can draw on while leaving your business banking account separate. A business can just draw on the RBC Visa card until the $40,000. loan is used up and while leaving your business account with a positive balance to use for expenses that don't qualify under the CEBA program.
I dont what you are going on about..I am with TD , got the loan got the money already.. had may long weekend of hookers and blow...no questions no issues
Sr. Member
Apr 29, 2007
558 posts
260 upvotes
Richmond Hill
OP, I think the person you spoke to was mistaken. I'm also with TD and got the CEBA loan.

The way I see it is this: The $40,000 was deposited into the business chequing account already. A separate "demand loan" account was created with a balance of $40,000. Thus the full $40,000 has already been advanced.

As for that loan agreement item, I assume it meant if your account is already overdrawn the $40,000 would go toward paying that off first. Then the remainder you can use.
Member
User avatar
Sep 16, 2015
211 posts
315 upvotes
Calgary, AB
regrus wrote:
The Canadian Government's CEBA website make reference to conditions on what the loan monies can be used for such as rent, payroll, utilities etc.

TD Banks deposited the CEBA $40,000. loan directly into my business checking account.
The bank deposited the $40,000 loan into your operating account. They also created another account called DEMAND LOAN with a balance owing of $40,000. You must repay $30,000 of the loan to the DEMAND LOAN account prior to December 31, 2022. In the meantime, you can use the loan proceeds to run your business.

The TD employee's comments about overdraft come from a statement near the bottom of the TD CEBA TERM LOAN AGREEMENT form that you received. It says, "The proceeds of the Loan will be deposited into your Business Account. Your Business Account will continue to operate in the normal course and if there is a negative balance in your Business Account, as a result of an overdraft facility or otherwise, the proceeds of the loan will automatically repay the amount outstanding up to the Loan Amount."

In other words, if your Operating Account had an overdraft of $5,000, the loan would pay down that $5,000 overdraft and you would have $35,000 remaining in your account. Unless you had a negative balance in your account when the funds were deposited, that is irrelevant to you.
Deal Addict
Jan 21, 2018
3401 posts
3515 upvotes
Vancouver
There is considerable uncertainty with the banks about CEBA, and they may give you some misinformation initially. They were caught by surprise and implemented the program in haste. Customer service employees haven't been fully briefed on it and in many cases know less than you.

Each bank implemented the loan differently. Some opened up a $40K line of credit and left it up to the business to draw on it. Other banks just deposited $40K directly to the company bank account. In many cases loan terms didn't arrive until later, and some copied the government CEBA terms verbatim while other banks added their own rules and interpretations.
Jr. Member
Jun 18, 2012
176 posts
22 upvotes
Can it be used like a loc? Pay some down then reuse again?
Deal Fanatic
User avatar
Jul 26, 2007
5079 posts
2694 upvotes
Toronto
grineding wrote: Can it be used like a loc? Pay some down then reuse again?
Nope.

All it says on the demand loan account that is 0% until Dec/2022. Hopefully it should update ability to payoff $30k before then.

TD and most bank don't know wtf they are supposedly doing so what's the point 2nd guessing them or asking 1st level csr on how things work?

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