Financing employee ownership transitions

Most conversions to worker-owned cooperatives are primarily debt-financed, in the form of loans to the employee-owned business, so it is important to ensure that the business can take on the debt servicing. 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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