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|
Line of Credit (for working capital)
or Preferred Equity
|Worker-Owners’ Equity (buy-in)||$100,000||5%|