CEBA ($40K loan) Tips, traps, and gripes category:NON-DEFERRABLE expense stream

The CEBA loans were for current operating expenses, not for a startup business. You need to show your business operating expenses for last year, and explain why you need the loan to keep operating this year.

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Refering to CEBA. I bought material to build an eBkes for Ride Sharing and IoT controller for the eBikes and also contract for software development to create the Apps but CEBA said the materials and Software Development are not for creating a product. How can I explain it to CEBA the materials and software development expenses will result in the creation of products a ride sharing bike and mobile Apps?

I think you are viewing the CEBA support as a business development opportunity. Unfortunately that is not what it is for. You will have to go for more traditional business funding opportunities.

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Two things: 1) the corporation should have filed at least a year of taxation before January 2020. 2) If you bought the raw material in cash, it is ineligible. Software development contract signed pre-pandemic time is valid but you needed to engage your accountant to help you out. There are a lot of details that needs to be taken care of.

No, I don’t think so. What is the difference between my business Non-Deferrable
Expenses and someone else buying material to creating a product ?

Among other things…you have no product. You have an idea. they’re different.

Most of the respondents here are tax pros. You can argue with CRA but people here are trying to inform you.

Non-deferrable expenses are expenses that you can’t postpone or ignore, like interest payments or livestock feed or hydro for your plant; things that must be paid by your established business.

@hcantave

Since NOTHING you have said indicates in any way that your business qualifies, I am not sure why you would be attempting to question it here.

(This forum is not your CPA, nor your financial institution, nor Export Development Canada.)

Did you not discuss this with your business’s CPA in 2020?
Perhaps you should explore other funding options by discussing all your business’s details with your business’s CPA. That would appear to be your best route to take.

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Just don’t comment if you don’t understand. as obhorst said “Non-deferrable expenses are things that must be paid by your established business.” for some it’s livestock … for me it’s raw material, eletronics and software development to create a product

@hcantave

It seems that I may have to repeat myself in order to guide you to the best path:
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"Since NOTHING you have said indicates in any way that your business qualifies, I am not sure why you would be attempting to question it here.

Did you not discuss this with your business’s CPA in 2020?
Perhaps you should explore other funding options by discussing all your business’s details with your business’s CPA.
That would appear to be your best route to take.
"

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In addition, please be cautioned that the main function of this board is for (professional) tax preparers, particularly those that are customers of the host’s professional tax software. Those without a detailed background and experience in the intricacies and difficult complexities of accounting and tax law are almost certainly guaranteed to misapprehend the import of things alluded to in even generic postings here. Actions taken on such misapprehensions gleaned from the internet could potentially be legally very dangerous.
Caveat Utilitor

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I think this is appropriate again.

Dead Horse

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I have prepared applications that were rejected first time around, but when I understood what they are asking for, I was successful in applying. However from the little detail you have provided, there is absolutely no way you would qualify because it is based on prior years expenses that they deem to be non-deferrable. You need to provide invoice copies and there are very strict rules concerning the invoice format.

Oh sorry, @Arliss, I just missed your post, but you are right. When I repeat things like this I refresh my own memory, but I believe they are not taking new applications so it is all moot.

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Where in the following list from CRA’s own website do we find such things as raw materials (direct costs)?

CEBA is not intended to provide income support, or support for variable operating expenses to businesses. CEBA is intended to support businesses by providing financing for their expenses that cannot be avoided or deferred as they take steps to safely navigate a period of shutdown, thereby helping to position businesses for successful relaunch when the economy reopens.

The Eligible Non-Deferrable Expense categories are the following:

  • Wages and other employment expenses to independent (arm’s length) third parties;
  • Rent or lease payments for real estate used for business purposes;
  • Rent or lease payments for capital equipment used for business purposes;
  • Payments incurred for insurance related costs;
  • Payments incurred for property taxes;
  • Payments incurred for business purposes for telephone and utilities in the form of gas, oil, electricity, water and internet;
  • Payments for regularly scheduled debt service;
  • 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;
  • Payments incurred for materials consumed to produce a product ordinarily offered for sale by the Borrower.

Direct cost does include raw materials but are not the same. Wages, a direct cost, was an eligible and much easier route for the loan.

While raw material by itself does not constitute a non-deferral expense, the ACT OF FINANCING it does. Provided that you have the agreement detailing the instalments and the amount of interest payables.