A bipartisan bill designed to curb barriers facing America’s small businesses was unanimously passed by the U.S. House of Representatives Small Business Committee last week, creating increased access to financing for a new crop of employee-owned businesses.
Introduced by Rep. Nydia Velazquez (D-NY), the Main Street Employee Ownership Act of 2018 (H.R. 5236) seeks to amend longstanding inequities in how the Small Business Administration (SBA) administers loans to Employee Stock Ownership Plans (ESOPs) and worker cooperatives.
An amendment from Rep. Steve Chabot (R-OH), who co-sponsored the bill with Velazquez, adds specific language that benefits cooperatives. Traditionally, co-ops have been effectively blocked from accessing SBA lending programs due to loan guarantee requirements that are incompatible with the business model.
The amendment directs SBA to work with lenders, the cooperative business community and relevant federal agencies to develop practical reforms that make their lending programs more accessible to co-ops.
The Main Street Employee Ownership Act of 2018 comes at a critical moment as a generation of Baby Boomer small business owners prepares for retirement, seeking viable options that maintain the values and principles of their family businesses and ensuring the welfare of their employees.
“While it’s wonderful to think that family members will take over the business, this doesn’t always happen,” Rep. Velazquez said in a press release. Instead, an estimated 2.3 million companies nationwide could face buyout by a rival or even closure, gutting Main Streets across the nation.
“I am pleased that the bill we passed will help empower employees to become owners in their companies,” Velazquez added. As a group, Baby Boomers own close to half of the nation’s privately-held businesses, employing one in six workers nationwide.
“Small businesses are at the heart of stable, sustainable communities,” said Doug O’Brien, president and CEO of NCBA CLUSA. “Making these SBA loans more accessible will directly bolster cooperative investment in communities across the country.”
Rep. Velazquez said she had worked closely with the office of Sen. Kristen Gillibrand (D-NY) on supporting employee ownership. The bill now moves to the full House for consideration. Gillibrand is expected to introduce similar legislation in the Senate in the coming week.