September 15, 2021

Budget Committee Markup of Build Back Better Bill Includes $500 Million for Employee Ownership

NCEO founder and senior staff member

Updated September 27

As part of implementing the statutory provisions popularly known as the Main Street Employee Ownership Act and enacted in 2018 as part of the National Defense Authorization Act for fiscal year 2019, on September 26 the House Budget Committee approved a $500 million employee ownership pilot program as part of its final markup of a $25 billion bill for the Small Business Administration (SBA) that is part of the $3.5 trillion Build Back Better bill.

The program “provides $500 million to fund a pilot program for eligible worker cooperatives and employee-owned businesses to receive SBA loan products without the requirement of a personal or entity guarantee.” This would presumably include ESOPs, employee-owned trusts, and worker cooperatives (other types of cooperatives are covered as well). The bill also allows community development financial institutions (organizations focused on low-income communities) to make loans to these entities. The bill provides that the SBA will guarantee loans under the program.

Personal guarantees have been a particular issue for worker cooperatives but can be for ESOP loans as well. If the seller retains some ownership after the transaction, potentially including warrants even in a 100% sale, the SBA can require a personal guarantee from the seller.