Can I sell my business if I still owe a CEBA loan?

If you are preparing to sell and a Canada Emergency Business Account (CEBA) loan is still on the books, you may wonder whether it blocks a sale or can pass to the buyer. The program’s public pages answer neither question. This page sets out what they do say, so you can see where the gaps are, and what to ask about the rest.

Who owes the loan

The CEBA program describes its loans as provided to eligible small businesses and not-for-profits, and it calls the borrower the Loan Holder. So the debt belongs to the business that received it. Whether that matters to you depends on how the sale is built, which the program pages do not address. Ask your lawyer how the debt is treated in your deal, whether it is a sale of shares or of assets.

What the program says about repayment

The program’s pages say the forgiveness deadline was January 18, 2024, or March 28, 2024 for those who had applied to refinance with the financial institution that provided their CEBA loan by January 18. For loans still outstanding as of January 19, 2024 where the Loan Holder is eligible and in good standing, the terms include non-amortizing, with the full principal due on December 31, 2026. Check the program’s home page for the current date, because the program’s own notices govern.

If the loan is not repaid

The program says the financial institution will first ask for a lump sum. If the loan is still unpaid, the institution will likely be required to assign it to the CEBA Program for collection, and the Canada Revenue Agency may then review the borrower’s circumstances case by case. It also says unpaid balances may be deducted from tax refunds and federal benefits.

What the pages do not say, and what to ask

Nothing in the program pages we read covers a sale, a change of ownership or a business closing. Treat that as a gap to close, not as permission or a ban. Ask your lending institution in writing whether the loan must be repaid at closing or can stay with the corporation if the shares are sold, and whether it will confirm that in a letter. Tell your lawyer early, so the purchase agreement and the closing payments deal with the loan. For the wider picture, see what happens to my business debt when I sell.