Problems You May Face With Your CEBA Loan Application

Author: B A Sheahan & Associates Ltd. | | Categories: Accounting , Bookkeeping , Tax Consulting


Most small businesses have suffered some form of a financial challenge due to the COVID-19 pandemic. For some, it may be easier to recover, but for others, especially small businesses, it’s undoubtedly going to be an uphill battle.

If your small business needs financial support, the Canadian government is willing to help you cover your expenses and meet your financial obligations through The Canada Emergency Business Account (CEBA). Under this program, small business owners can apply for a CEBA loan of $40,000. In the early stages when this financial assistance first became available, a small business without employees did not qualify for assistance. CRA then adjusted the guidelines whereby if businesses engaged subcontractors, they too could qualify.

To obtain this loan, CRA is looking to identify “non-deferrable expenses” that include items such as lease or mortgage payments, utility commitments, and where subcontractors are being used as opposed to employees, an agreement that specifies the engagement, the rate of pay, the period of the engagement, and evidence that the engagement is ongoing (Invoices). In our experience with these submissions, often applications are denied if the paperwork is not in order, and while the business owner may be able to supply the proper paperwork, they do not pursue an answer from CRA to determine the actual reason for the decline.

To help you gather all of the essential requirements for the application of a CEBA loan, B A Sheahan & Associates Ltd. has listed a few of the challenges you may face and how our services may help you overcome them.

1. Lack of proper documentation
CEBA demands proper documentation when it comes to loan applications. But very often, small business clients that are “busy” but in need of an additional $40,000 to $60,000 of loan support (which is interest-free for two years) from CEBA - require assistance in collecting paperwork and developing their business descriptions to qualify for this loan. Usually, these business owners have many “qualifying expenses” that are non-deferrable but poorly documented. B A Sheahan may be able to assist in this area.

When applying for a CEBA loan, one needs to use non-deferable expenses that were in existence during January and February of the current year and be able to confirm that these continue for them during the remainder of the year. Often an agreement with a sub-contractor is based on the delivery of an invoice from the sub-contractor to the business owner without any formal agreement. It is sufficient to have a simple agreement properly documented that outlines the arrangement and includes the amount of compensation being called for, the term of the arrangement, the start of the agreement, end of the agreement period, and any other commitments involved, and is signed off by both parties. A simple agreement between the parties clarifies the arrangement, based on real-time activities, and a legitimate reason (qualifier) for CEBA loan support.

2. Confusion caused by a variety of possibilities
Business owners are sometimes confused by the variety of possibilities that they have available to them to claim their loan support through CRA properly. Clarification for the customer often permits them to complete their loan application process on their own. But, a little advice can go a long way to helping in this case.

If a business owner has applied for CEBA loan support and has been declined, they can call CEBA and ask for reasons as to why their application was denied. They have until the end of December 2020 to properly document their submission, or possibly add more non-deferrable expenses to their application, and re-qualify.

3. Inability to gather information needed for your report
Customers often have the facts and proof for their non-deferrable expenses in their hands, but they require assistance in organizing these materials in a manner acceptable to CRA. At B A Sheahan & Associates Ltd., we have seen applications that have failed and understand what CEBA officials require when they review loan applications. We can assist in organizing the documentation related to our client’s business to meet the qualifications set out by CEBA.

Based on our experience, the final submission of the loan application to qualify for the $40,000 loan support can be achieved by the client gathering relevant materials and proof of costs. These include a lease document that is current and properly executed, car loan agreement, telephone bill for their business, internet and fax lines for their business, subcontractor payments paid for services required by the business, and supplied regularly. Evidence of this by way of invoices and a short agreement can be beneficial. We work with our clients to put together these pieces of information and arrive at a formal report, which is then submitted to CEBA officials.

4. Need for “In The Cloud” Accounting Services
When a client expands into other businesses, they often need new accounting files for their separate companies. B A Sheahan & Associates Ltd maintains shelf companies using QB Online from Intuit. These shelf companies already have a standard chart of accounts, and are ready to be engaged on the same day the service is required. Once required, we connect to the client with an invitation to participate. We have a working file for them to review and begin their activities, which can now be recorded. Delivery time for a file with a working chart of accounts and some personal details takes less than sixty minutes in each case and we will also have the new files ready for review within the same day of the request.

For more accounting solutions to your financial challenges, reach out to the experts at B A Sheahan & Associates Ltd. We are a bookkeeping and accounting firm in Victoria, BC, and we have worked in the accounting field for over thirty-five years. To ensure you are happy with what we have to offer, we provide a free initial consultation where we cover all of the areas where we can provide assistance. Following this, we discuss your needs and challenges. Accordingly, we suggest solutions and strategies that will support you.

To learn all about our bookkeeping and accounting solutions, please click here or get in touch with us by clicking here.  

Read More Blog Articles