September 15, 2022

The NCEO Launches the ESOP Finance Toolkit and Lender directory

Executive Director

Business bankers see companies of different sizes, ages, industries, and they may think there are no surprises left… until they see what an ESOP does to a company’s financials.

Whether you're looking for financing to establish an ESOP or you're looking for working capital or a line of credit for your existing ESOP, the NCEO just released a new resource for members: the ESOP Finance Toolkit and Lender Directory.

Financing an ESOP can be simple, and it often is, but the best way to make sure that your company is getting the financing it needs is to be an informed consumer. Our toolkit is designed to help our members by providing an overview of financing, from all-purpose basics to ESOP-specific issues. We also provide an overview of seller-financing and how that will affect your conversations with outside lenders. We’ve got some suggestions for working with banks, with advisors, and also with non-bank sources of capital, from subordinated debt and unitranche loans to equity investors.

Whether you end up pursuing a loan from a national bank with an established ESOP practice or working with a local lender with whom you already have a relationship, the finance toolkit can help you avoid some of the pitfalls, whether that’s paying for services you don’t need or footing the bill to educate a lender who is unfamiliar with ESOPs.

The toolkit also includes resources to help companies navigate the tricky and quickly changing landscape around SBA-backed loans for ESOP transactions, understand the covenants your bank may request, see how one ESOP company periodically reevaluates its bankers, and prepare your company to be the best loan candidate possible.

Additionally, we've updated and revamped our directory of lenders that are NCEO members and have ESOP experience. The directory is a great place to start your search for lenders who understand the peculiarities of ESOPs but, as with any significant financial transaction, it is not a substitute for doing your own careful due diligence.

The finance toolkit is a living document – we will be adding more resources to it over time, and we’d love to hear your suggestions or contributions! Contact me at [email protected] to let us know what resources you’re looking for, and if you represent a lender who should be listed, contact Ramona Rodriguez-Brooks at [email protected].

This toolkit adds to a line of member resources, such as the ESOP Introductory Package and the Board Excellence Toolkit and Candidate Directory, which curate NCEO member-exclusive articles, webinars, documents, and more, to demystify some of the most common ESOP topics.