On Thursday, November 21, Ranking Member of the House Small Business Committee, Rep. Nydia Velázquez (D-NY-07) introduced two bills: the Main Street Employee Ownership 2.0 Act of 2024 (H.R. 10242), and the Improving SBA Engagement on Employee Ownership Act (H.R. 10244). Both bills reflect longstanding priorities for the cooperative community and would increase access to key lending programs within the Small Business Administration (SBA). NCBA CLUSA strongly supports these bills and thanks Ranking Member Velazquez for her consistent championing of cooperatives. If your cooperative or organization wishes to demonstrate your support for these bills, click here.
Show your support for these bills
Main Street Employee Ownership 2.0 Act of 2024 (H.R. 10242)
The Main Street 2.0 Bill would level the playing field by prohibiting the SBA from requiring cooperatives to provide a personal or entity guarantee for a 7(a) loan. It would also prohibit the SBA from requiring that the seller of a business being purchased with a 7(a) loan for conversion to an employee-owned cooperative provide a seller guarantee. Additionally, the legislation would codify cooperative eligibility for SBA’s disaster assistance programs.
While explicitly eligible to access SBA business lending programs, cooperatives are effectively barred due to a personal guarantee requirement that must be provided by individuals who own 20 percent or more of a small business to access financing. To learn more about the personal guarantee and cooperative access to capital, click here.
In 2018, Congress passed the Main Street Employee Ownership Act, which required the SBA to explore meaningful alternatives to the personal guarantee requirement. However, the agency has yet to propose a solution. In May 2023, the SBA finalized new regulations for it loan programs. The final rule stated the agency will require a personal guarantee from cooperatives “unless otherwise prohibited by law.” This bill would accomplish that by waiving the personal guarantee requirement for cooperatives and providing entrepreneurs, lenders and retiring business owners with the necessary tools to preserve small businesses.
Improving SBA Engagement on Employee Ownership Act (H.R. 10244)
This legislation would improve SBA’s outreach and engagement on employee ownership and cooperative development by requiring the administrator to attend meetings and working groups on cooperatives and employee ownership hosted by the federal government, including Interagency Working Group on Cooperative Development meetings. The bill also requires the administrator to establish a small business employee ownership and cooperatives promotion program through the network of Small Business Development Centers (SBDCs) to offer technical assistance and training on the transition to employee ownership through cooperatives and qualified employee trusts.
The Main Street Employee Ownership 2.0 Act and the Improving SBA Engagement on Employee Ownership Act propose important changes and reaffirm Ranking Member Velázquez’s commitment to leveling the playing field and increasing access to capital for cooperatives.