Title: Main Street Employee Ownership Act of 2018
Policy area: Commerce

Summary:
Main Street Employee Ownership Act of 2018
This bill amends the Small Business Act to expand the authority of the Small Business Administration (SBA) to guarantee loans for qualified employee trusts of a small business to purchase the stock of that business. Specifically, the bill allows the guaranteed loan to also cover transactions costs associated with purchasing the stock. In addition, it allows loans to a small business to be guaranteed if the loan proceeds will: (1) be used to provide loans to a qualified employee trust of the small business to purchase the business's stock; and (2) result in the trust owning at least 51% of the business's stock. The SBA must guarantee loans to cooperatives in which employees are eligible for membership for such stock purchases.
The SBA shall establish: (1) an outreach program with licensed small business investment companies to increase investment in transitions to employee-owned businesses, and (2) a Small Business Employee Ownership and Cooperative Promotion Program to offer technical assistance and training on the transition to employee ownership through cooperatives and qualified employee trusts.
The Administrator of the SBA shall coordinate an interagency working group on employee-owned businesses.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5236 Introduced in House (IH)]

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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. Velazquez 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.

    Be it enacted by the Senate and House of Representatives 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 ``Administrator'' 
        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 Administrator;
            (3) the term ``employee-owned business concern'' means--
                    (A) a cooperative in which employees are eligible 
                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 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 
                                purchasing,'' after ``purchasing'';
                                    (II) by striking the period at the 
                                end and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(ii) to a small business concern under a plan 
                approved by the Administrator, if the proceeds from the 
                loan are only used to make a loan to a qualified 
                employee trust, and for any transaction costs 
                associated with making that loan, that results in the 
                qualified employee trust owning at least 51 percent of 
                the small business concern.'';
                    (B) in subparagraph (B)--
                            (i) in the matter preceding clause (i), by 
                        inserting ``or by the small business concern'' 
                        after ``the trustee of such trust'';
                            (ii) in clause (ii), by striking ``and'' at 
                        the end;
                            (iii) in clause (iii), by striking the 
                        period 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 paragraph (35)--
                            ``(I) a seller of the small business 
                        concern may remain involved as an officer, 
                        director, 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, may be required 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 concern that is guaranteed by the 
        Administration under such subparagraph.
            ``(G) The Administration shall not require a qualified 
        employee trust or any member of the trust to provide a personal 
        guarantee on a loan guaranteed under this paragraph unless any 
        single member of the trust has more than a 20 percent ownership 
        share in the trust.
            ``(H) With respect to a loan made to a qualified employee 
        trust under this paragraph, or to a cooperative in accordance 
        with paragraph (35), the Administrator may, as deemed 
        appropriate, elect to not require 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 a corporation--
                            ``(i) that is determined to be a 
                        cooperative by the Administrator, in accordance 
                        with applicable Federal and State laws and 
                        regulations; and
                            ``(ii) in which employees are eligible for 
                        membership.
                    ``(B) Authority.--The Administration shall 
                guarantee loans made to a cooperative for the purpose 
                described in paragraph (15).
                    ``(C) No guarantee.--With respect to a cooperative 
                that is formed through a transfer of ownership, the 
                Administrator may, as deemed appropriate, waive the 
                requirement for a guarantee on a loan guaranteed under 
                this paragraph unless any single member of the 
                cooperative has more than a 20 percent ownership share 
                in the cooperative.''.
    (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 establish an outreach program with 
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 investments in company transitions to employee-owned business 
concerns.

SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUTREACH.

    The Administrator shall establish an outreach program with 
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 concerns, including transitions to employee-owned business 
concerns.

SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUTREACH AND ASSISTANCE.

    (a) Establishment.--The Administrator shall establish a Small 
Business Employee Ownership and Cooperatives 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 development centers under which 
        the centers shall--
                    (A) provide access to information and resources on 
                employee ownership through cooperatives or qualified 
                employee trusts as a business succession strategy;
                    (B) conduct training and educational activities; 
                and
                    (C) carry out the activities described in 
                subparagraph (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;
                    (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 (collectively 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 individuals in the 
                formation of an employee-owned business concern;
                    ``(ii) assisting employee-owned business concerns 
                that meet applicable size standards established 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 conducting 
                outreach on financing through programs administered by 
                the Administration that may be used to support the 
                transition of ownership to employees;
                    ``(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 development 
                centers of the Department of Agriculture, the land 
                grant extension network, the Manufacturing Extension 
                Partnership, community development financial 
                institutions, employee ownership associations and 
                service providers, and local, regional and national 
                cooperative 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 designee 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, cooperative, and small business 
        organizations; and
            (3) submit an annual report to Congress on the activities 
        of the interagency working group.
    (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 ``Administration.'' and inserting 
``Administration, which shall include--
                            ``(i) the total number of loans made to 
                        employee-owned business concerns that were 
                        guaranteed by the Administrator under section 
                        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 individuals; 
                                and
                                    ``(II) to cooperatives in which 
                                employees are eligible for membership; 
                                and
                            ``(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 individuals; 
                                and
                                    ``(II) to cooperatives in which 
                                employees are eligible for membership; 
                                and
                            ``(iii) any outreach and educational 
                        activities conducted by the Administration with 
                        respect to employee-owned business concerns.''.
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