Roger Granger* faces a health crisis that could ruin his budding business and his son’s financial future. We spoke with three experts to determine his options.

The situation

Mark Granger is 30 and works in corporate public relations in Toronto. He earns $78,000 yearly and rents a condo with carrying costs of $1,400 a month. He lives alone, but his longtime girlfriend, Tina, is planning to move in with him.

His 58-year-old father, Roger, is a serial entrepreneurial failure whose latest venture, a software company in Tisdale, Sask. that produces mobile apps, shows more signs of success than past tries—finally. Mark is an only child and his mother died three years ago. He’s remained close to his father and even done some pro bono marketing work to help his dad’s firm control costs.

Mark co-signed on a $500,000 business loan for his father three years ago. The infusion of capital helped, and the company is on the brink of profit. His dad’s been meeting all loan servicing costs to date, but the loan still has seven years left on its term (so most of the payments so far have gone to interest). The loan rate is 5.6% and there’s still $390,000 in principal remaining to be paid.

Last month, Roger went through a battery of medical tests after complaining of stomach cramps. The result was a diagnosis of stage 3 pancreatic cancer, for which there’s a low five-year survival rate. His doctor has advised him to prepare for the worst, and to stop working as soon as possible so that the treatments will have the best chance
of success.

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Roger is very concerned about the residual costs of his business loan ruining his son financially. At one point, he owned a house but lost it after putting it up as collateral on loans for a prior, now failed, business. He now rents a small apartment, which is suited to his workaholic lifestyle.

Roger declared personal bankruptcy once before, in 2005, and has no other assets, having cashed out a UL policy with $64,567 in accumulated value to meet business debts 15 years ago. He is drawing a take-home salary of $2,400 monthly from his company—which covers his expenses in the rural hamlet of Tisdale but leaves little left over.

He’s appealed to Mark to leave Toronto and take over the business, certain that his youth and energy is what’s needed to push the firm to profitability. Mark, having grown up in a whirlpool of economic uncertainty sparked by what he views as his father’s refusal to get a real job, has announced that won’t happen.

Still, he’s worried for his father and afraid of how the remainder of the loan he’s co-signed could potentially wreck his financial future.

The company has developed some popular apps, but they are niche products and wouldn’t have any significant sale value to a competitor.

Its status as a startup that’s not yet profitable makes it difficult to value. However, two of the young software engineers working there have expressed interest in making a provisional offer that would include taking over the debt based on existing cashflow for apps in field. With four more potential moneymakers on the drawing board and close to launch, Roger is reluctant to consider this offer.

Read: 7 succession planning tips for biz owners

But he also doesn’t want his son to inherit his debts, and the co-signed loan is, unfortunately, one of the few vehicles that can allow that to happen.

Planning mistakes

Sharon E. Duguid: Roger is having what we like to call a trigger event. These are events with a life-changing impact—a stroke, divorce, or unexpected illness like cancer.

Many business owners don’t plan for these possibilities, or they don’t do the right planning.

That can leave them with few options, and this is the situation Roger’s in.

Kim Moody: That’s why I always suggest critical illness insurance for clients who are starting a business, and who will rely on it for all their income. If all of a sudden the client gets cancer and can’t support himself, at least he has a sustainable source of cash that can either pay for treatments or replace lost income.

SD: Also, when Roger took out the $500,000 loan, he should’ve bought life insurance. This would protect Mark from the debt in the event of Roger’s death. That’s no longer an option.

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