In 2018 the Main Street Employee Ownership Act (MSEOA) was passed. It was thought the MSEOA would allow companies to get an SBA 7(a) loan for an ESOP transition. Unfortunately, the SBA requirements to secure the 7(a) loan for an ESOP transition made it unlikely that anyone to use it. They are still using a case-by-case approval process for ESOP loans. The NCEO outlines those requirements in a recent blog post.
This June, Congress introduced H.R. 8254. The Appropriations Committee report states:
Employee Ownership.–The Committee recognizes that employee-owned businesses are uniquely structured and provide wide-ranging benefits for businesses, workers, and the local economy. The Committee notes that the Main Street Employee Ownership Act, which Congress enacted in section 862 of Public Law 115-232, requires SBA to make structural changes in SBA lending programs to ease the challenges faced by employee-owned businesses in accessing financing. This legislation also requires SBA to use Small Business Development Centers (SBDCs) to establish an employee-owned business promotion program to provide assistance on structure, business succession, and planning. SBA is directed to fully implement these requirements. The Committee further directs SBA to work with the Departments of Agriculture, Labor, and Commerce to provide education and outreach to businesses, employees and financial institutions about employee-ownership, including cooperatives and employee stock ownership plans; provide technical assistance to assist employees’ efforts to become businesses; and assist in accessing capital sources.
If this bill gets passed, it may create a great opportunity for businesses to sell to their employees.