IB 
Union Calendar No. 494 
115TH CONGRESS 
2D SESSION 
H. R. 5236 
[Report No. 115–645] 
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 
APRIL 24, 2018 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on March 8, 2018] 
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To expand opportunities available to employee-owned busi-
ness concerns through Small Business Administration 
loan programs, and for other purposes. 
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Main Street Employee 
Ownership Act of 2018’’. 
SEC. 2. DEFINITIONS. 
In this Act— 
(1) the terms ‘‘Administration’’ and ‘‘Adminis-
trator’’ means the Small Business Administration 
and the Administrator thereof, respectively; 
(2) the term ‘‘cooperative’’ means an entity that 
is determined to be a cooperative by the Adminis-
trator, in accordance with applicable Federal and 
State laws and regulations; 
(3) the term ‘‘employee-owned business concern’’ 
means— 
(A) a cooperative in which employees are el-
igible for membership; and 
(B) a qualified employee trust; 
(4) the terms ‘‘qualified employee trust’’ and 
‘‘small business concern’’ have the meanings given 
those terms in section 3 of the Small Business Act (15 
U.S.C. 632); and 
(5) the term ‘‘small business development center’’ 
means a small business development center described 
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in section 21 of the Small Business Act (15 U.S.C. 
648). 
SEC. 3. EXPANSION OF 7(A) LOANS. 
(a) IN GENERAL.—Section 7(a) of the Small Business 
Act (15 U.S.C. 636(a)) is amended— 
(1) in paragraph (15)— 
(A) in subparagraph (A)— 
(i) by striking ‘‘this subsection to 
qualified employee trusts’’ and inserting 
‘‘this subsection— 
‘‘(i) to qualified employee trusts’’; 
(ii) in clause (i), as so designated— 
(I) by inserting ‘‘, and for any 
transaction costs associated with pur-
chasing,’’ after ‘‘purchasing’’; 
(II) by striking the period at the 
end and inserting ‘‘; and’’; and 
(iii) by adding at the end the fol-
lowing: 
‘‘(ii) to a small business concern under a 
plan approved by the Administrator, if the pro-
ceeds from the loan are only used to make a loan 
to a qualified employee trust, and for any trans-
action costs associated with making that loan, 
that results in the qualified employee trust own-
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ing at least 51 percent of the small business con-
cern.’’; 
(B) in subparagraph (B)— 
(i) in the matter preceding clause (i), 
by inserting ‘‘or by the small business con-
cern’’ after ‘‘the trustee of such trust’’; 
(ii) in clause (ii), by striking ‘‘and’’ at 
the end; 
(iii) in clause (iii), by striking the pe-
riod at the end and inserting ‘‘, and’’; and 
(iv) by adding at the end the following: 
‘‘(iv) with respect to a loan made to a trust, 
or to a cooperative in accordance with para-
graph (35)— 
‘‘(I) a seller of the small business con-
cern may remain involved as an officer, di-
rector, or key employee of the small business 
concern when a qualified employee trust or 
cooperative has acquired 100 percent of 
ownership of the small business concern; 
and 
‘‘(II) any seller of the small business 
concern who remains as an owner of the 
small business concern, regardless of the 
percentage of ownership interest, shall be re-
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quired to provide a personal guarantee by 
the Administration.’’; and 
(C) by adding at the end the following: 
‘‘(F) A small business concern that makes a loan 
to a qualified employee trust under subparagraph 
(A)(ii) is not required to contain the same terms and 
conditions as the loan made to the small business con-
cern that is guaranteed by the Administration under 
such subparagraph. 
‘‘(G) With respect to a loan made to a qualified 
employee trust under this paragraph, or to a coopera-
tive in accordance with paragraph (35), the Adminis-
trator may, as deemed appropriate, elect to not re-
quire any mandatory equity to be provided by the 
qualified employee trust or cooperative to make the 
loan.’’; and 
(2) by adding at the end the following: 
‘‘(35) LOANS TO COOPERATIVES.— 
‘‘(A) DEFINITION.—In this paragraph, the 
term ‘cooperative’ means an entity that is deter-
mined to be a cooperative by the Administrator, 
in accordance with applicable Federal and State 
laws and regulation. 
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‘‘(B) 
AUTHORITY.—The 
Administration 
shall guarantee loans made to a cooperative for 
the purpose described in paragraph (15).’’. 
(b) DELEGATION
OF AUTHORITY
TO PREFERRED 
LENDERS.—Section 5(b)(7) of the Small Business Act (15 
U.S.C. 634(b)(7)) is amended by inserting ‘‘, including 
loans guaranteed under paragraph (15) or (35) of section 
7(a)’’ after ‘‘deferred participation loans’’. 
SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PROGRAM 
OUTREACH. 
The Administrator shall provide outreach and edu-
cational materials to companies licensed under section 
301(c) of the Small Business Investment Act of 1958 (15 
U.S.C. 681(c)) to increase the use of funds to make invest-
ments in company transitions to employee-owned business 
concerns. 
SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUT-
REACH. 
The Administrator shall provide outreach and edu-
cational materials to intermediaries under section 7(m) of 
the Small Business Act (15 U.S.C. 636(m)) to increase the 
use of funds to make loans to employee-owned business con-
cerns, including transitions to employee-owned business 
concerns. 
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SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUT-
REACH AND ASSISTANCE. 
(a) ESTABLISHMENT.—The Administrator shall estab-
lish a Small Business Employee Ownership and Coopera-
tives Promotion Program to offer technical assistance and 
training on the transition to employee ownership through 
cooperatives and qualified employee trusts. 
(b) SMALL BUSINESS DEVELOPMENT CENTERS.— 
(1) IN GENERAL.—In carrying out the program 
established under subsection (a), the Administrator 
shall enter into agreements with small business devel-
opment centers under which the centers shall— 
(A) provide access to information and re-
sources on employee ownership through coopera-
tives or qualified employee trusts as a business 
succession strategy; 
(B) conduct training and educational ac-
tivities; and 
(C) carry out the activities described in sub-
paragraph (U) of section 21(c)(3) of the Small 
Business Act (15 U.S.C. 648(c)(3)). 
(2) ADDITIONAL SERVICES.—Section 21(c)(3) of 
the Small Business Act (15 U.S.C. 648(c)(3)) is 
amended— 
(A) in subparagraph (S), by striking ‘‘and’’ 
at the end; 
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(B) in subparagraph (T), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following: 
‘‘(U) encouraging and assisting the provision of 
succession planning to small business concerns with a 
focus on transitioning to cooperatives, as defined in 
section 7(a)(35), and qualified employee trusts (collec-
tively referred to in this subparagraph as ‘employee- 
owned business concerns’), including by— 
‘‘(i) providing training to individuals to 
promote the successful management, governance, 
or operation of a business purchased by those in-
dividuals in the formation of an employee-owned 
business concern; 
‘‘(ii) assisting employee-owned business con-
cerns that meet applicable size standards estab-
lished under section 3(a) with education and 
technical assistance with respect to financing 
and contracting programs administered by the 
Administration; 
‘‘(iii) coordinating with lenders on con-
ducting outreach on financing through programs 
administered by the Administration that may be 
used to support the transition of ownership to 
employees; 
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‘‘(iv) supporting small business concerns in 
exploring 
or 
assessing 
the 
possibility 
of 
transitioning to an employee-owned business 
concern; and 
‘‘(v) coordinating with the cooperative de-
velopment centers of the Department of Agri-
culture, the land grant extension network, the 
Manufacturing Extension Partnership, commu-
nity development financial institutions, em-
ployee ownership associations and service pro-
viders, and local, regional and national coopera-
tive associations.’’. 
SEC. 7. INTERAGENCY WORKING GROUP. 
(a) IN GENERAL.—Not later than 90 days after the 
date of enactment of this Act, the Administrator (or a des-
ignee of the Administrator) shall coordinate and chair an 
interagency working group, which shall— 
(1) develop recommendations on how Federal 
programs can promote, support, and increase the 
number of employee-owned business concerns; 
(2) ensure coordination with Federal agencies 
and national and local employee ownership, coopera-
tive, and small business organizations; and 
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(3) publish a report on the activities of the inter-
agency working group that is indexed and main-
tained for public review. 
(b) MEETINGS.—The interagency working group shall 
meet at such times as determined necessary by the, but not 
less than biannually. Such meetings may occur in person 
or via electronic resources. 
SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS 
OF EMPLOYEE-OWNED FIRMS. 
Section 7(a)(15)(E) of the Small Business Act (15 
U.S.C. 636(a)(15)(E)) is amended by striking ‘‘Adminis-
tration.’’ and inserting ‘‘Administration, which shall in-
clude— 
‘‘(i) the total number of loans made to 
employee-owned business concerns that were 
guaranteed by the Administrator under sec-
tion 7(a) of the Small Business Act (15 
U.S.C. 636(a)) or section 502 of the Small 
Business Investment Act of 1958 (15 U.S.C. 
696), including the number of loans made— 
‘‘(I) to small business concerns 
owned and controlled by socially and 
economically disadvantaged individ-
uals; and 
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‘‘(II) to cooperatives in which em-
ployees are eligible for membership; 
‘‘(ii) the total number of financings 
made to employee-owned business concerns 
by companies licensed under section 301(c) 
of the Small Business Investment Act of 
1958 (15 U.S.C. 696(c)), including the 
number of financings made— 
‘‘(I) to small business concerns 
owned and controlled by socially and 
economically disadvantaged individ-
uals; and 
‘‘(II) to cooperatives in which em-
ployees are eligible for membership; 
and 
‘‘(iii) any outreach and educational 
activities conducted by the Administration 
with respect to employee-owned business 
concerns.’’. 
SEC. 9. REPORT ON COOPERATIVE LENDING. 
(a) SENSE OF CONGRESS.—It is the sense of Congress 
that cooperatives have a unique business structure and are 
unable to access the lending programs of the Administration 
effectively due to loan guarantee requirements that are in-
compatible with the business structure of cooperatives. 
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