I 

115TH CONGRESS 

2D SESSION H. R. 5236 

To expand opportunities available to employee-owned business concerns 

through Small Business Administration loan programs, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 8, 2018 

Ms. VELA ́ZQUEZ introduced the following bill; which was referred to the 

Committee on Small Business 

A BILL 

To expand opportunities available to employee-owned business concerns through Small Business Administration 

loan programs, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Main Street Employee 

5 Ownership Act of 2018’’. 

6 SEC. 2. DEFINITIONS. 

7 In this Act— 


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1 (1) the terms ‘‘Administration’’ and ‘‘Adminis2 trator’’ means the Small Business Administration 

3 and the Administrator thereof, respectively; 

4 (2) the term ‘‘cooperative’’ means an entity 

5 that is determined to be a cooperative by the Admin6 istrator; 

7 (3) the term ‘‘employee-owned business con8 cern’’ means— 

9 (A) a cooperative in which employees are 

10 eligible for membership; and 

11 (B) a qualified employee trust; 

12 (4) the terms ‘‘qualified employee trust’’ and 

13 ‘‘small business concern’’ have the meanings given 

14 those terms in section 3 of the Small Business Act 

15 (15 U.S.C. 632); and 

16 (5) the term ‘‘small business development cen17 ter’’ means a small business development center de18 scribed in section 21 of the Small Business Act (15 

19 U.S.C. 648). 

20 SEC. 3. EXPANSION OF 7(a) LOANS. 

21 (a) IN GENERAL.—Section 7(a) of the Small Busi22 ness Act (15 U.S.C. 636(a)) is amended— 

23 (1) in paragraph (15)— 

24 (A) in subparagraph (A)— 


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1 (i) by striking ‘‘this subsection to 

2 qualified employee trusts’’ and inserting 

3 ‘‘this subsection— 

4 ‘‘(i) to qualified employee trusts’’; 

5 (ii) in clause (i), as so designated— 

6 (I) by inserting ‘‘, and for any 

7 transaction costs associated with pur8 chasing,’’ after ‘‘purchasing’’; 

9 (II) by striking the period at the 

10 end and inserting ‘‘; and’’; and 

11 (iii) by adding at the end the fol12 lowing: 

13 ‘‘(ii) to a small business concern under a 

14 plan approved by the Administrator, if the pro15 ceeds from the loan are only used to make a 

16 loan to a qualified employee trust, and for any 

17 transaction costs associated with making that 

18 loan, that results in the qualified employee trust 

19 owning at least 51 percent of the small business 

20 concern.’’; 

21 (B) in subparagraph (B)— 

22 (i) in the matter preceding clause (i), 

23 by inserting ‘‘or by the small business con24 cern’’ after ‘‘the trustee of such trust’’; 


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1 (ii) in clause (ii), by striking ‘‘and’’ at 

2 the end; 

3 (iii) in clause (iii), by striking the pe4 riod at the end and inserting ‘‘, and’’; and 

5 (iv) by adding at the end the fol6 lowing: 

7 ‘‘(iv) with respect to a loan made to a 

8 trust, or to a cooperative in accordance with 

9 paragraph (35)— 

10 ‘‘(I) a seller of the small business con11 cern may remain involved as an officer, di12 rector, or key employee of the small busi13 ness concern when a qualified employee 

14 trust or cooperative has acquired 100 per15 cent of ownership of the small business 

16 concern; and 

17 ‘‘(II) any seller of the small business 

18 concern who remains as an owner of the 

19 small business concern, regardless of the 

20 percentage of ownership interest, may be 

21 required to provide a personal guarantee 

22 by the Administration.’’; and 

23 (C) by adding at the end the following: 

24 ‘‘(F) A small business concern that makes a 

25 loan to a qualified employee trust under subparaVerDate Sep 11 2014 00:42 Mar 20, 2018 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5236.IH H5236

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1 graph (A)(ii) is not required to contain the same 

2 terms and conditions as the loan made to the small 

3 business concern that is guaranteed by the Adminis4 tration under such subparagraph. 

5 ‘‘(G) The Administration shall not require a 

6 qualified employee trust or any member of the trust 

7 to provide a personal guarantee on a loan guaran8 teed under this paragraph unless any single member 

9 of the trust has more than a 20 percent ownership 

10 share in the trust. 

11 ‘‘(H) With respect to a loan made to a qualified 

12 employee trust under this paragraph, or to a cooper13 ative in accordance with paragraph (35), the Admin14 istrator may, as deemed appropriate, elect to not re15 quire any mandatory equity to be provided by the 

16 qualified employee trust or cooperative to make the 

17 loan.’’; and 

18 (2) by adding at the end the following: 

19 ‘‘(35) LOANS TO COOPERATIVES.— 

20 ‘‘(A) DEFINITION.—In this paragraph, the 

21 term ‘cooperative’ means a corporation— 

22 ‘‘(i) that is determined to be a cooper23 ative by the Administrator, in accordance 

24 with applicable Federal and State laws and 

25 regulations; and 


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1 ‘‘(ii) in which employees are eligible 

2 for membership. 

3 ‘‘(B) AUTHORITY.—The Administration 

4 shall guarantee loans made to a cooperative for 

5 the purpose described in paragraph (15). 

6 ‘‘(C) NO GUARANTEE.—With respect to a 

7 cooperative that is formed through a transfer of 

8 ownership, the Administrator may, as deemed 

9 appropriate, waive the requirement for a guar10 antee on a loan guaranteed under this para11 graph unless any single member of the coopera12 tive has more than a 20 percent ownership 

13 share in the cooperative.’’. 

14 (b) DELEGATION OF AUTHORITY TO PREFERRED

15 LENDERS.—Section 5(b)(7) of the Small Business Act (15 

16 U.S.C. 634(b)(7)) is amended by inserting ‘‘, including 

17 loans guaranteed under paragraph (15) or (35) of section 

18 7(a)’’ after ‘‘deferred participation loans’’. 

19 SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PRO20 GRAM OUTREACH. 

21 The Administrator shall establish an outreach pro22 gram with companies licensed under section 301(c) of the 

23 Small Business Investment Act of 1958 (15 U.S.C. 

24 681(c)) to increase the use of funds to make investments 


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1 in company transitions to employee-owned business con2 cerns. 

3 SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUT4 REACH. 

5 The Administrator shall establish an outreach pro6 gram with intermediaries under section 7(m) of the Small 

7 Business Act (15 U.S.C. 636(m)) to increase the use of 

8 funds to make loans to employee-owned business concerns, 

9 including transitions to employee-owned business con10 cerns. 

11 SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUT12 REACH AND ASSISTANCE. 

13 (a) ESTABLISHMENT.—The Administrator shall es14 tablish a Small Business Employee Ownership and Co15 operatives Promotion Program to offer technical assist16 ance and training on the transition to employee ownership 

17 through cooperatives and qualified employee trusts. 

18 (b) SMALL BUSINESS DEVELOPMENT CENTERS.— 

19 (1) IN GENERAL.—In carrying out the program 

20 established under subsection (a), the Administrator 

21 shall enter into agreements with small business de22 velopment centers under which the centers shall— 

23 (A) provide access to information and re24 sources on employee ownership through coVerDate Sep 11 2014 00:42 Mar 20, 2018 Jkt 079200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5236.IH H5236

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1 operatives or qualified employee trusts as a 

2 business succession strategy; 

3 (B) conduct training and educational ac4 tivities; and 

5 (C) carry out the activities described in 

6 subparagraph (U) of section 21(c)(3) of the 

7 Small Business Act (15 U.S.C. 648(c)(3)). 

8 (2) ADDITIONAL SERVICES.—Section 21(c)(3) 

9 of the Small Business Act (15 U.S.C. 648(c)(3)) is 

10 amended— 

11 (A) in subparagraph (S), by striking 

12 ‘‘and’’ at the end; 

13 (B) in subparagraph (T), by striking the 

14 period at the end and inserting ‘‘; and’’; and 

15 (C) by adding at the end the following: 

16 ‘‘(U) encouraging and assisting the provision of 

17 succession planning to small business concerns with 

18 a focus on transitioning to cooperatives, as defined 

19 in section 7(a)(35), and qualified employee trusts 

20 (collectively referred to in this subparagraph as ‘em21 ployee-owned business concerns’), including by— 

22 ‘‘(i) providing training to individuals to 

23 promote the successful management, govern24 ance, or operation of a business purchased by 


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1 those individuals in the formation of an em2 ployee-owned business concern; 

3 ‘‘(ii) assisting employee-owned business 

4 concerns that meet applicable size standards es5 tablished under section 3(a) with education and 

6 technical assistance with respect to financing 

7 and contracting programs administered by the 

8 Administration; 

9 ‘‘(iii) coordinating with lenders on con10 ducting outreach on financing through pro11 grams administered by the Administration that 

12 may be used to support the transition of owner13 ship to employees; 

14 ‘‘(iv) supporting small business concerns in 

15 exploring or assessing the possibility of 

16 transitioning to an employee-owned business 

17 concern; and 

18 ‘‘(v) coordinating with the cooperative de19 velopment centers of the Department of Agri20 culture, the land grant extension network, the 

21 Manufacturing Extension Partnership, commu22 nity development financial institutions, em23 ployee ownership associations and service pro24 viders, and local, regional and national coopera25 tive associations.’’. 


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1 SEC. 7. INTERAGENCY WORKING GROUP. 

2 (a) IN GENERAL.—Not later than 90 days after the 

3 date of enactment of this Act, the Administrator (or a des4 ignee of the Administrator) shall coordinate and chair an 

5 interagency working group, which shall— 

6 (1) develop recommendations on how Federal 

7 programs can promote, support, and increase the 

8 number of employee-owned business concerns; 

9 (2) ensure coordination with Federal agencies 

10 and national and local employee ownership, coopera11 tive, and small business organizations; and 

12 (3) submit an annual report to Congress on the 

13 activities of the interagency working group. 

14 (b) MEETINGS.—The interagency working group 

15 shall meet at such times as determined necessary by the, 

16 but not less than biannually. Such meetings may occur 

17 in person or via electronic resources. 

18 SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS 

19 OF EMPLOYEE-OWNED FIRMS. 

20 Section 7(a)(15)(E) of the Small Business Act (15 

21 U.S.C. 636(a)(15)(E)) is amended by striking ‘‘Adminis22 tration.’’ and inserting ‘‘Administration, which shall in23 clude— 

24 ‘‘(i) the total number of loans made to 

25 employee-owned business concerns that 

26 were guaranteed by the Administrator 


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1 under section 7(a) of the Small Business 

2 Act (15 U.S.C. 636(a)) or section 502 of 

3 the Small Business Investment Act of 

4 1958 (15 U.S.C. 696), including the num5 ber of loans made— 

6 ‘‘(I) to small business concerns 

7 owned and controlled by socially and 

8 economically disadvantaged individ9 uals; and 

10 ‘‘(II) to cooperatives in which 

11 employees are eligible for membership; 

12 and 

13 ‘‘(ii) the total number of financings 

14 made to employee-owned business concerns 

15 by companies licensed under section 301(c) 

16 of the Small Business Investment Act of 

17 1958 (15 U.S.C. 696(c)), including the 

18 number of financings made— 

19 ‘‘(I) to small business concerns 

20 owned and controlled by socially and 

21 economically disadvantaged individ22 uals; and 

23 ‘‘(II) to cooperatives in which 

24 employees are eligible for membership; 

25 and 


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1 ‘‘(iii) any outreach and educational 

2 activities conducted by the Administration 

3 with respect to employee-owned business 

4 concerns.’’. 

Æ 


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