Tips on How to Prepare for $40K CEBA Loan Application

Happy belated Canada Day everyone. 

Coincidentally, Canada Day is also the changeover anniversary day of my homeland, Hong Kong, from UK to China. 

It’s a bitter-sweet day for people who still have ties over there. 

On this anniversary day, China imposed a new set of security laws, which “makes secessionist, subversive or terrorist activities illegal…”  

If someone shouts slogans or holds up banners and flags calling for Hong Kong’s independence, police now have the authority to arrest this person.  

In other words, expressing political opinion is no longer a right over there. 

Violation of the law may mean that you could be extradited to China.  China has the death sentence.

Over 300 protestors were arrested within hours of this law coming into effect early yesterday.

Even the Canadian government has issued a travel advisory against this new legislation, travellers may be at increased risk of arbitrary detention on national security grounds.  

Freedom of speech, that we Canadians all take for granted, is no longer available there.  

We’re all beyond blessed as Canadians.  

Speaking about being blessed, I just completed the online application for the Canada Emergency Business Account for my real estate holding corporation. 

The application was supposed to be open two weeks ago, but the process got delayed.  They are finally rolling it out to the major banks. 

The process is surprisingly simple.  

I’m asked to confirm if I had filed my 2018 or 2019 tax returns.  If so, I would need to provide Box 400 of my corporation tax return so that the bank can verify my application.  

I’m also required to provide the total projected eligible non-deferrable expenses for 2020. 

Based on my 2019 financial information, I was able to come up with my 2020 projection relatively easily.  Here’s the sample I prepared for my own application for your reference. 

The number I submitted is the TOTAL amount of non-deferrable expenses, i.e. $179,748 in my example.

I was then asked to provide proof of $40K of eligible non-deferrable expenses. 

I provided my mortgage commitment letter that I received from my property refinance.  Monthly mortgage payment is just under $3,000.  I enter the frequency of payment and it works out to be $36,000.  

I also submitted my property tax bill for the year, which works out to be around $5,000.  

Combined of the two is over $40K.  That’s all I have to supply.

The application process was much easier than I expected.  

I have not got the official approval yet, so I am hoping the information I provided was sufficient for the approval.

For those real estate investors that own your properties inside a corporation, if you have more than $40K eligible non-deferrable expenses, make sure you apply and get some help from the government. 

This CEBA loan will provide you $40K immediate cash to pay for these expenses.  The loan is interest-free until December 31, 2022.  

If you repay before December 31, 2022, $10K is waived. 

If you aren’t sure  you qualify, visit the government website to read through the eligibility requirement.  

Some real estate investors own properties in their personal names from a legal perspective, but designate the beneficial owner as the corporation.  

This can potentially pose an issue when applying for the CEBA loan, as some of your mortgage statements can be showing your name, not the corporation’s name.  

Additional documentation may be required to prove the corporation is the true owner. 

In addition to that, when bills are issued, more often than not, the vendors/contractors would issue them to the real estate investors’ names directly, rather than the corporation’s name.  

You might want to make sure your agreements and invoices received are addressed to the corporation.  This ensures that your application gets approved. 

Good luck with your application. 

Until next time, 

Cherry Chan, CPA, CA

A blessed Canadian and Real Estate Accountant