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How to apply for CEBA loan as Real Estate Investors and agents

A few weeks ago, Prime Minister Justin Trudeau announced that he is expanding the criteria to qualify for the $40K Canada Emergency Business Account loan (or CEBA loan).

Application for CEBA loan is OPEN Friday, June 19 under the expanded criteria.

It is an interest-free loan until 2022. If you repay by December 2022, $10K of which is waived.

To qualify, as a minimum, you need to have 

  1. A business bank account registered on or before March 1, 2020
  2. A business number registered with CRA
  3. And one of the two criteria below:
  1. You have $20K payroll expenses in 2019 (T4); or
  2. The expanded criteria listed below

Under the expanded criteria, a business must have more than $40K of non-deferrable expenses.

Non-deferrable expenses include:

(1) wages and other employment expenses to independent contractors (arm’s length parties)

(2) Rent or lease payments for real estate used for business purposes;

(3) Rent or lease payments for capital equipment used for business purposes;

(4) insurance related costs;

(5) property taxes;

(6) telephone and utilities in the form of gas, oil, electricity, water and internet;

(7) Payments for regularly scheduled debt service;

(8) Payments incurred under agreements with independent contractors and fees required in order to maintain licenses, authorizations, or permissions necessary to conduct business by the Borrower.

Application will be open this Friday via your online business bank account. You have to apply through the major Chartered Banks that you regularly bank with.

From the first glance of these criteria, it looks like many real estate holding companies will qualify, provided that the amount of expenses mentioned above is over $40K in 2020. 

The application process is a lot more cumbersome though.  You will be asked to provide the documentation that supports the requirement that you have over $40K of expenses. 

This means – if you have property tax bills for the year, mortgage documents, insurance policies, telephone and utilities bills, etc., then those are the expenses that you would need to provide. 

My position is that you won’t know what we need until you submit the application and get a response back. 

Be prepared to get your books up to date, receipts ready to provide documentation tomorrow!

For real estate agents…

If you’re realtors, some common expenses that you might consider including in the non-deferrable expenses calculation – 

  • Cell phone bills
  • RECO license
  • TREB/RAHB membership
  • RECO Insurance
  • Monthly fees paid to your brokerage
  • Business use of automobile leases
  • Financing for your automobile expenses
  • Subcontractor fees paid to your assistants

You might still not be able to apply at this point, given that you don’t have a business bank account with a regular bank.  Justin Trudeau did make a commitment to provide a workaround to this shortfall.  

Be patient.  Your help is coming. 

For more information on the CEBA loan check our other article and the Program website.

Until next time, happy Canadian Real Estate Investing. 

Cherry Chan, CPA, CA

Your Real Estate Accountant