For the first time, SSBCI credit is allowable for purchases interests from a business owner toward conversion to employee ownership in a Worker Cooperative, ESOP, or EOT.
NATIONWIDE U.S.A. – The Democracy at Work Institute (DAWI) has created a new online portal to support workers becoming owners. This is in response to the new federal program, the State Small Business Credit Initiative (SSBCI) of the U.S. Treasury, which for the first time allows the use of SSBCI loans for businesses to transition to Worker Cooperatives, Employee Stock Ownership Plans, or Employee Ownership Trusts, on the condition that employee-owners end up holding more than half of the business.
Owners can benefit from having the employees take over the business by getting a fair market price, and ensuring their business’s legacy by selling to reliable and experienced workers. These alternative business models put workers and community benefit at the core of its purpose. For example in worker cooperatives workers own the business and they participate in its financial success, they are part of and vote for the board of directors, while adhering to the principle of one worker, one vote.
Conversions to employee-ownership with SSBCI capital funding are also particularly relevant to supporting the sustainability of SEDI owned businesses. They may be at higher risks of closing due to their inability to “compete in the free enterprise system having been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged” as per the U.S. Treasury Department definition of SEDI owned businesses.
According to Rutgers University Institute for the Study of Employee Ownership and Profit Sharing, the combination of employee ownership and a culture of participation leads to Employee Outcomes of higher commitment, lower turnover, greater effort, and more suggestions – Strategic Outcomes of increased productivity and innovation – and Financial Outcomes of return on equity. Read more at Worker Coops: Weathering the storm of COVID-19 and Beyond.
DAWI’s free information and referral portal includes resource links and a 30-minute intake application for business owners considering selling to their employees. During these intake meetings, DAWI’s Business Transfers Program Director, Frank Cetera, will provide insights on the process, free resources, and options and referrals to one of 30 members of the Workers to Owners Collaborative (W2O). W2O is a working group that specializes in employee ownership conversions composed of business developers, technical assistance providers, Community Development Financial Institutions (CDFIs) and members of the National Employee Ownership Expansion Network.
A prime example of Becoming Employee Owned in New York State is WardLumber Worker Cooperative from Jay, NY which formed in March 2021, creating 50 new worker-owners in a $3.2 million deal. This multi-year process showcased financing and business development resources from multiple partners including the NY Small Business Development Center (NYSBDC), NY Empire State Development (NYESD), Cooperative Fund of the North East (CFNE) and Cooperative Development Institute (CDI) to make this transition from Legacy Ownership to Employee Ownership possible.
The first recorded example of a conversion to worker cooperative with SSBCI program support is from Bell Street Builders in Portland, ME that utilized the Grow Maine Loan Participation Program from the Finance Authority of Maine (FAME).
“Businesses reaching out for assistance through the BEO portal will get connected through a referral with a W2O member in their location to help them with planning for the possible access and use of SSBCI financing programs. “ – Frank Cetera, DAWI Business Transfers Program Director
About DAWI and BEO
The mission of the Democracy at Work Institute is to expand the worker cooperative model to meet the needs of workers locked out of good jobs and ownership opportunities, especially BIPOC, recent immigrant, and low-wage workforces. We are a movement-based think-and-do tank supporting worker cooperatives to grow to a scale that creates meaningful change in the economy. BEO is a coordinated campaign to spur an unprecedented number of transitions to worker ownership through strategic pipeline building, outreach and education, advocating for supportive regulations and policy, developing sustainable funding sources, and developing a comprehensive national network of service providers. Learn more at https://institute.coop/mission-vision or contact Karina Pacheco del Río, DAWI’s Director of Communications and Marketing at kpacheco@institute.coop. To learn more about DAWI’s support towards SSBCI implementation, contact Frank Cetera at fcetera@institute.coop or (415) 379-9201 x25.
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