Helping Businesses Transition to Employee Ownership

Investing for a more resilient economy

Challenge: Local businesses are the lifeblood of our economy. However, today they face twin crises: COVID-19, and the existing silver tsunami of baby boomers’ retirements that impact nearly half of all job-creating small businesses.

This moment is critical for local business ownership and jobs.

Selling to employees can keep these businesses and their jobs in communities by increasing the viable pool of buyers and tapping the energy of the next generation to address today’s business challenges.

Broad-based employee ownership builds more resilient local economies with stronger small businesses, higher-quality jobs, and a path to business ownership for low-income workers and workers of color. But there is limited financing available to help small businesses make this powerful transition.

Solution

Project Equity Fund II will target businesses throughout the U.S. with 25–50+employees that want to transition to employee ownership but need capital to finance the transition and transaction. The fund will promote resilient, quality jobs, increase worker voice and preserve and strengthen small business assets in communities.

The fund will help:

  • Catalyze employee ownership, including for smaller businesses that face significant barriers to accessing capital from most lenders
  • Expand the pipeline of businesses that can consider employee ownership
  • Support businesses that have committed to transition to employeeownership with working capital to help them survive and emerge from the COVID-19 crisis by adapting business models, avoiding layoffs and beginning the employee ownership transition

Why do we need a fund?

Small businesses and communities—especially communities of color—need stability now and access to capital is even more limited during COVID-19. The fund will address these short-term needs and provide long-term solutions for worker empowerment and income and wealth equality. Mission Driven Finance, a full-spectrum impact investment fund manager, will manage the fund.

Project Equity’s track record

Project Equity has a strong track record of engaging small businesses to learn about employee ownership through a national network of partners. We provide pre-to-post transactional support to help selling owners create succession plans and make the employee ownership transition. This strategy cements selling owners’ legacies and gives them a market rate sale (often with significant tax benefits) for their life’s work.

Since 2019, Project Equity and Shared Capital, a 40-year strong Community Development Finance Institution (CDFI), have collaborated on a joint initiative, Accelerate Employee Ownership, that pairs Project Equity’s expert guidance with tailored, flexible financing for employee ownership transitions, primarily in California, Arizona, and Nevada. Three transactions have been financed through this first capital initiative, with the next six to eight forecasts to be completed in 2021.

This second fund complements Accelerate Employee Ownership by:

  • Expanding to a national lending footprint
  • Increasing flexibility of uses of capital so that small businesses can be nimble in this dynamic time
  • Growing transaction capital available to meet growing deal flow of businesses transitioning to employee ownership

Contact us about opportunities to support employee ownership.

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