David Barnett wrote at 2006-11-29 19:48:23
Hi Marina,
When financing the purchase of a business, there are many options. Often, one must make decisions about flexibility and the cost of financing.
For example: if a good portion of the purchase price were in the form of equipment, a lease could be used to finance that part of the business.
Other specific financing tools could be used to finance any other "hard" assets of the business.
In your case, the easiest and cheapest way to finance this purchase would be to get an equity line of credit on your home, then loan the $80,000 to a corporation you own which would buy the business.
This structure is important (and you should consult an accountant and a lawyer) In Canada, if you invest in the equity of a business and it fails, you can claim a capital loss against future gains. If you make a LOAN to a company you control and the business fails, the loan can be deemed uncollectible and thus may become an ABIL (allowable business investment loss) This would be deductible against ANY future income. Including employment income.
Best of Luck
David Barnett
Business Finance Consultant
