Landmark Employee Ownership Act, Signed Into Law Yesterday, Will Amend Lending Landscape for Worker Co-ops


The biggest employee ownership legislative victory in two decades was signed into law yesterday as a key cooperative provision of the expansive $717 billion defense bill.

Championed by Sen. Kirsten Gillibrand (D-NY) in the Senate and Rep. Nydia Velazquez (D-NY) in the House, the bipartisan Main Street Employee Ownership Act amends longstanding inequities in how the Small Business Administration (SBA) administers loans to Employee Stock Ownership Plans (ESOPs) and worker cooperatives.

“Small businesses are at the heart of stable, sustainable communities and worker co-op conversions are a proven strategy to strengthen and preserve local businesses nationwide,” said Doug O’Brien, president and CEO of NCBA CLUSA. “We are thrilled to see the Main Street Employee Ownership Act become law, and stand ready to support local economic development through employee ownership.”

Critically, the act makes employee-owned businesses eligible for SBA section 7(a) loans for the first time in history. While the law provides no new public funds to employee-owned firms, it does fast-track loan dispersal to help companies finance conversion to employee ownership—costs that, according to Rep. Velazquez, can exceed $80,000.

The new law comes at a pivotal moment as a generation of Baby Boomer small business owners prepares for retirement, seeking viable options that preserve the culture of their family businesses and ensure that their employees continue to have decent jobs.

As a group, Baby Boomers own close to half of the nation’s privately-held businesses, employing one in six workers nationwide. “This legislation fills an important gap, allowing many of these firms to transition to an employee-owned structure, keeping the businesses intact and retaining jobs in the local community,” Velazquez said.

Beyond improving the lending landscape for ESOPs and worker cooperatives, the Main Street Employee Ownership Act creates viable retirement opportunities for entrepreneurs, provides more employees a stake in the businesses they work for and expands technical assistance nationwide.

The act also directs SBA to work with the nation’s network of 900 Small Business Development Centers to provide transition-related technical training, executive education, and one-on-one consulting.

And for good reason. “Employee-owned businesses have a strong track record of better pay and retirement benefits for workers and a commitment to creating local jobs,” Sen. Gillibrand said.

Gillibrand, whose amendment to the defense bill ensured passage of the act, spent a year beforehand meeting with employees of ESOPs and cooperatives across New York State and consulting with cooperative stakeholder associations, among them NCBA CLUSA and the U.S. Federation of Worker Cooperatives.

The cooperative community is welcoming news that the Main Street Employee Ownership Act has been codified. Charles E. Snyder, president and CEO of the National Cooperative Bank, recognized the work of Congressional champions, NCBA CLUSA and the worker cooperative sector, calling the legislation “unprecedented.”

“As a lender to cooperatives nationwide, we recognize the need for access to capital for employee and consumer-owned businesses,” Snyder said. “The Main Street Employee Ownership Act will help meet this need in important ways.”

Cooperative advocates are also pleased that the act requires SBA—through its new Small Business Employee Ownership and Cooperatives Promotion Program—to coordinate with cooperative development centers and cooperative stakeholder organizations nationwide, making NCBA CLUSA and similar associations natural implementation partners in efforts to create better jobs and a fairer economy.

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