CEBA LOAN CALCULATOR
Are you worried about your CEBA Loan? We’ve created a CEBA Loan calculator to help you navigate repayments. This calculator will help you if you have cash left over at the end of each month that you can use to pay off your CEBA loan.
By spending 10 minutes with the CEBA Loan calculator, you will be able to:
- Assess whether you can afford to repay your full CEBA loan over the next two years at an interest rate of 5%,
- Compare this to the cost of a refinancing loan, and
- Determine how much free cash flow you will have (if any) after servicing your monthly payment and setting aside cash to repay your principal.
Remember that this CEBA Loan calculator provides estimates only. This calculator is designed to provide a clearer picture into your repayment options based on the information you have available to you. This is not professional advice from a professional financial advisor.
If you don’t have cash left over at the end of the month that you can put toward servicing your debt, one action you can take is to send a letter to MPs to let them know you need help. The more they hear about the realities of running a business right now, the more you help to humanize the effects of their decision and the stronger the case for revising repayment guidelines.
CEBA Loan Calculator: Step 1
For “CEBA principal outstanding”, fill in the current total amount outstanding on your CEBA loan, before any repayments.
For “monthly free cash flow”, fill in how much cash you have left over each month: sales revenue less expenses less transfers out (e.g. to savings accounts, other debts). In other words, this is your profit, in cold hard cash, for the month. It’s not earmarked for any particular future payment. Do not include accounts payable in your sales revenue, just include what you’ve actually received in cash that month.
CEBA Loan Calculator: Step 2
This section provides estimates if you were to pay the government directly for the full value of your CEBA loan. In other words, it’s what it would look like if you don’t take out (or qualify for) a refinancing loan.
It tells you how much you’ll need to pay in interest each month.
It also tells you your “monthly remaining free cash flow for paying off principal”. After paying your monthly interest fees, you would have this much cash to put aside each month to pay off your principal (for CEBA and refinancing loans).
If you were to save all of the free cash flow after your monthly interest payments, in order to pay off your principal, you’d have a pile of cash worth “amount I can save until December 2025”. If this amount is less than your principal, the box turns red. This means you won’t have enough to pay the full principal by December 2025. If this amount is greater than your principal, the box turns green.
The next number, “how much cash will I have left over or be in debt by December 2025”, tells you how much you’ll be short (if you got a red box) or how much extra cash you’ll have on-hand (if you got a green box).
CEBA Loan Calculator: Step 3
This section predicts what it’ll look like if you take out a refinancing loan (for instance Meridian’s product).
You’ll need to fill out the “current prime rate in Canada”, which you can find online at https://www.ratehub.ca/prime-rate. The prime rate is the Bank of Canada’s interest rate, which changes over time. Your refinancing interest rate is assumed to be prime rate + 1.25% (based on Meridian’s product).
You also need to fill out “refinancing loan amount (new principal owed)”, which is the amount of money you’ll owe the financial institution. If you’re not sure of this number, assume it’s the unforgiven portion of the loan, probably around $40,000.
This section will tell you your monthly interest payment and estimates your principal payment, too. Unlike the government’s scheme, you might have to make principal payments on your refinancing loan on a regular basis. This is ultimately up to your financial institution.
“How much monthly free cash flow will I have left over after my loan payments” is the amount of cash you will have in your pocket each month, after your monthly interest and principal payments.
To find out if you can afford a refinancing loan, look at “can I afford this based on my free cash flow?”. This box gives you a YES or NO answer. If you have cash left over (above $0), you can afford a financing loan based on how much cold, hard cash you have to pay it off. If you don’t have enough cash on hand to make the payment, you can’t afford the refinancing plan being offered.
Frequently Asked Questions
What if I’m offered a different refinancing loan from my bank?
Other refinancing products are popping up on the market, and most of those have higher interest rates than the Meridian product modelled in Section 3. If you’re offered a product with a higher interest rate, you can still use Section 3 to figure out how much it will cost you if it’s a 3-year payment term. In the first box, prime rate, you can input: Interest Rate Offered minus (-) 1.25%
For instance, if you’re offered a 12% interest rate over 3 years, you would input [12% – 1.25% =] 10.75%.
The other inputs in the CEBA Loan calculator are the same.
How do I make a decision about repayment, and when should I decide?
Weigh out your options with regards to cash flow, risk, and potential expenses coming down the pipeline. Every business’s situation is unique.
We recommend you avoid taking a personally secured loan, if at all possible. These are the riskiest because it means you lose your personal AND business assets if things go belly-up. It can be very destabilizing for you personally.
As for timing, we haven’t seen any indications from the government regarding changing CEBA repayment terms, but the pressure from business groups has only increased. We expect that a change to the program, if offered, would be announced in the fall around the time of the Fall Economic Statement.
If it’s possible for you to wait until the government makes a definitive announcement about CEBA, we recommend that you do.