On August 13th, a significant pro-ESOP bill was signed into law. The Main Street Employee Ownership Act (S. 2786) was signed into law as part of the Senate’s National Defense Authorization Act (NDAA).
The highlight of this new law is it updates the Small Business Administration’s (SBA) lending practices to allow employee-owned businesses to be eligible for SBA 7(a) loans. Section 7(a) enables banks to issue loans to small businesses for up to $5 million, of which the government insures 85 percent of the loan. These 7(a) loans are intended to help finance small business expansion. With this new law in place, these 7(a) loans can now help to finance the transition of a family owned business to an ESOP structure.
The new law also directs the SBA’s outreach infrastructure to encourage business owners to consider employee ownership.