Frequently Asked Questions

Employee Ownership FAQs

Common questions about employee stock ownership plans (ESOPs), employee ownership trusts (EOTs), and other forms of employee ownership, from the basics to technical topics.

This FAQ is written primarily for business owners, managers, and advisors involved in setting up or running an employee ownership plan. If you're an employee at an ESOP company looking to understand your own benefits and rights, see our articles on Working at an ESOP Company and The Rights of ESOP Participants.

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Can an ESOP be financed by a line of credit?

ESOP loans must have a definite term, so the loan to the ESOP itself cannot be a line of credit. However, most ESOPs are financed by an outside loan to the company, which reloans the money to the ESOP, but not necessarily on the same terms. So the outside loan could be a line of credit. The specific structuring of these loans can become complicated, so seeking professional advice is essential.

Link to this FAQ Topic: Financing an ESOP