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Financing employee ownership transitions

Most employee ownership transitions are primarily debt-financed, in the form of loans to the business, so it is important to ensure that the business can take on the debt servicing. Because of this, one of the most important first steps in assessing fit of an employee ownership transition is a feasibility assessment that incorporates a debt capacity analysis.

Businesses that work with Project Equity to transition their businesses to employee ownership are eligible to apply for flexible and affordable financing through Accelerate Employee Ownership.

For worker cooperative transitions, equity financing is increasingly being utilized through issuing non-voting preferred equity shares, including through Direct Public Offerings (DPOs). The employees’ buy-in amount becomes equity, but does not cover the complete sale price. The following is an example of how a worker coop conversion could be financed for a business with a sale price of $2 million. For more examples, read our financing case studies.

Example: Financing sources for a worker coop conversion
Source Amount Percent
Senior Debt $900,000 45%
Senior Debt
Line of Credit (for working capital)
$200,000 10%
Subordinated Debt
Seller Financing
$300,000 15%
Subordinated Debt
or Preferred Equity
$500,000 25%
Worker-Owners’ Equity (buy-in) $100,000 5%
Total $2,000,000

See examples

of how coop conversions are financed

Read FAQ's

about worker coop conversion financing


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Businesses owned by baby boomers

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