Historic Pro-ESOP Bill Signed into Law!

For the first time in 21 years, the U.S. Congress passed a law to expand employee ownership. In particular, this law facilitates loans in ESOP transactions through the Small Business Administration (SBA). Historically, it has been problematic to have SBA loans in ESOP transactions. As described in this article on NonProfitQuarterly.org, the new law remedies the major hurdles by doing the following:

• Updating SBA’s lending practices to better serve employee-owned businesses.

Empowering the SBA to assist small business owners in converting their companies to employee ownership through outreach and training programs.
Directing the SBA to coordinate with funds licensed as SBA Small Business Investment Companies and its microloan program to consider employee ownership as an area for investment and lending.

Perhaps the key provision in the legislation is the removal of the requirement that the selling shareholder be completely out of the business within 12 months of the transaction. This provision had been a major problem in using an SBA loan in an ESOP transaction.

This is a great example of the Democrats and Republicans working together to adopt legislation that helps both American businesses and workers.