CEBA loans fall due on December 31. What that means for a sale
The remaining Canada Emergency Business Account loans fall due on December 31, 2026. For an owner who is selling, the balance is debt paid from the proceeds, and a buyer will ask about it.
Outstanding CEBA loans became three year term loans at 5 percent on January 19, 2024, and the full principal is due December 31, 2026. In a business sale the balance is debt: paid from the proceeds at closing in a share sale, and repaid by the seller’s corporation in an asset sale. Repaying the lost forgivable portion is tax deductible.
What falls due on December 31
Every Canada Emergency Business Account loan that missed the forgiveness deadline became a term loan. Its principal falls due on December 31, 2026, and an owner selling in the coming months may see the due date and the closing fall within weeks of each other.
The program lent $49.1 billion to about 898,000 small businesses between April 2020 and June 2021. Each loan was interest free and partly forgivable if repaid in time.
Repayment by January 18, 2024 earned forgiveness of $10,000 on a $40,000 loan and $20,000 on a $60,000 loan. A borrower who applied to refinance with its lender by that date had until March 28, 2024.
On January 19, 2024 the remaining loans became three year term loans at 5 percent a year, with the full principal due December 31, 2026. A borrower who missed the window owes the whole original amount.
The terms come from a Finance Canada announcement of September 2023. Later federal reports, including Statistics Canada’s in February 2025, repeat the same date.
How much is still owed
The Auditor General’s December 2024 report set out where the money stood at March 31, 2024, after the refinancing extension had closed.
| Status at March 31, 2024 | Amount | Share of $49.1 billion |
|---|---|---|
| Repaid | $28.1 billion | 57.2 percent |
| Forgiven on repaid loans | $12.4 billion | 25.3 percent |
| Still outstanding | $8.5 billion | 17.3 percent |
| Written off | $0.1 billion | 0.2 percent |
Statistics Canada measured the unpaid share at the January deadline at 18.8 percent of loan value. Transportation and warehousing carried the highest share, at 30.7 percent, followed by administrative and support services at 22.7 percent.
In late 2023, Statistics Canada asked businesses with an unpaid loan whether they expected to have the cash or credit to clear it by December 31, 2026. About two thirds, 65.6 percent, said yes. Another 14.5 percent expected to fall short.
Some balances reached collections well before the final date. By November 19, 2024, about 70,000 loans worth $3.5 billion had been assigned to the Canada Revenue Agency.
How lenders run the term loan
The program sets the rate and the date, and each lender sets the mechanics. ATB takes interest only payments from the borrower’s account at every month end. CIBC lets the interest accrue and collects it with the principal.
Both allow the principal to be paid down early, in part or in full. CIBC describes early repayment as penalty free. On a $60,000 balance, interest at 5 percent comes to $3,000 a year, so each month of delay has a price.
A missed payment of principal or interest puts a loan in default, and so does insolvency or a breach of the loan terms. The lender asks for the balance first.
A loan that stays unpaid is assigned to the program, and the CRA collects it, seeking a lump sum or agreeing a payment plan.
Where it sits on the balance sheet
The loan is a debt of whoever borrowed it. With the due date inside twelve months, a balance sheet dated in 2026 shows the whole balance as a current liability.
Legal form decides who that is. A corporation’s loan is the corporation’s debt. A sole proprietor’s loan is the owner’s own debt, and the obligation stays with the owner after the business closes or is sold.
The program itself says a change of ownership affects the loan according to the business’s legal structure and the kind of change. That makes the structure of the sale the first question.
Share sale or asset sale
Most offers are priced cash free and debt free: the seller keeps the cash and pays off the debt at closing. A letter of intent should define what counts as debt, and a CEBA balance belongs on that list.
In a share sale the buyer takes the corporation along with every debt inside it. The lender issues a payout figure, principal plus any unpaid interest, and the lawyers pay it from the price before the balance reaches the seller.
In an asset sale the loan stays with the seller’s corporation, which receives the price. The corporation repays the lender from that money, and the buyer leaves the debt behind.
One trap sits in the closing adjustments. As a current liability, the loan can drift into the working capital figure. Counted there and again as debt, it would come off the price twice.
What a buyer asks in diligence
A buyer’s diligence list asks for payout figures on every debt. On a CEBA balance the questions run a little further.
- Which body holds the loan today, the original lender or the CEBA program after assignment?
- The buyer wants the current payout figure, dated close to closing.
- Where the lender collects interest monthly, a record of payments since January 2024 shows the loan in good standing.
- In a share sale, the buyer asks whether the corporation met the program’s eligibility rules when it borrowed, since the CRA verified eligibility both before and after funding.
The eligibility question matters most in a share sale, because any later claim would land on the corporation the buyer now owns. Buyers commonly ask the seller for a representation and an indemnity to cover it.
The tax point
The CRA’s view is that the forgivable portion was income under paragraph 12(1)(x) in the year the loan was received. A borrower could report it that year or elect to reduce deductible expenses by the same amount.
A borrower who missed the deadline repays that portion after all. Paragraph 20(1)(hh) gives a deduction for it in the year of repayment. A $60,000 loan with $20,000 reported in 2020 and repaid in full in 2026 produces a $20,000 deduction for 2026.
Interest on a loan used in the business is generally deductible as well. In a sale, the payout date decides which tax year carries the deduction, and that is a question for the accountant before closing.
Before the due date
For a sale that closes before December 31, the payout at closing settles the loan. A sale that slips into 2027 leaves a loan past its due date, open to assignment for collection in the middle of the deal.
Repaying from cash ahead of a sale removes one item from diligence. A refinance replaces it with ordinary bank debt, which comes off the price at closing on the same terms.
Either way, the balance reduces what the seller keeps. Knowing the payout figure early lets an owner read an offer at its true value, and the free Quick AI valuation is a place to start.
Questions owners ask
- When is the CEBA loan due?
- Outstanding CEBA loans converted to three year term loans on January 19, 2024, at 5 percent a year. The full principal is due December 31, 2026. A loan left unpaid is assigned to the CEBA program, and the Canada Revenue Agency collects it.
- What happens to a CEBA loan when you sell your business?
- It is treated as debt. In a share sale the lender’s payout figure is paid from the purchase price at closing, before the rest reaches the seller. In an asset sale the loan stays with the seller’s corporation, which repays it from the price. A sole proprietor’s loan stays with the owner personally.
- Is repaying the forgivable part of a CEBA loan tax deductible?
- Generally, yes. The CRA treats the forgivable portion as income in the year the loan was received. A borrower who missed the forgiveness deadline and repays that portion claims a deduction under paragraph 20(1)(hh) of the Income Tax Act in the year of repayment.