H.R. 5236House115th Congress (2017-2019)Passed House

Main Street Employee Ownership Act of 2018

AI-Generated Summary

Updated April 15, 2026 at 8:53 PM UTC

The Main Street Employee Ownership Act of 2018 aims to make it easier for small businesses to become employee‑owned, either through cooperatives or qualified employee trusts. It does this by expanding SBA loan programs, providing outreach and technical help, and requiring new reporting and coordination among federal agencies. The changes affect small businesses, lenders, SBA staff, and organizations that support employee ownership.

Key Provisions

Adds employee‑owned businesses (cooperatives and qualified employee trusts) as eligible recipients of SBA 7(a) loans and allows loan proceeds to cover purchase costs and related transaction fees.
Lets a seller stay on as an officer, director, or key employee after an employee‑owned trust or cooperative acquires 100% of a business, but requires a personal guarantee from any seller who remains an owner.
Gives the SBA authority to guarantee loans directly to cooperatives and lets the agency waive mandatory equity contributions for these loans.
Requires the SBA to provide outreach and educational materials to Small Business Investment Companies and micro‑loan intermediaries to promote financing for employee‑owned transitions.
Creates a Small Business Employee Ownership and Cooperatives Promotion Program, using Small Business Development Centers to offer training, technical assistance, and succession‑planning help for employee‑owned businesses.
Mandates an interagency working group to develop recommendations, coordinate efforts, and publish reports on expanding employee‑ownership opportunities.
Expands the SBA’s annual report to Congress to include data on loans and financings to employee‑owned businesses, including those owned by socially and economically disadvantaged individuals.
Orders a study and report on how loan‑guarantee rules can be adjusted to better serve cooperatives.

Legislative Activity

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12 earlier actions

SenateIntro Referral Latest Action

Received in the Senate and Read twice and referred to the Committee on Small Business and Entrepreneurship.

Small Business and Entrepreneurship Committee

May 9, 2018

View full timeline

HouseIntro Referral

Introduced in House

March 8, 2018

HouseIntro Referral

Referred to the House Committee on Small Business.

Small Business Committee

March 8, 2018

HouseCommittee

Committee Consideration and Mark-up Session Held.

Small Business Committee

March 14, 2018

HouseCommittee

Ordered to be Reported (Amended) by Voice Vote.

Small Business Committee

March 14, 2018

HouseCommittee

Reported (Amended) by the Committee on Small Business. H. Rept. 115-645.

Small Business Committee

April 24, 2018

HouseCalendars

Placed on the Union Calendar, Calendar No. 494.

April 24, 2018

HouseFloor

Mr. Chabot moved to suspend the rules and pass the bill, as amended.

May 8, 2018 • 2:48 PM

HouseFloor

Considered under suspension of the rules. (consideration: CR H3810-3812)

May 8, 2018 • 2:48 PM

HouseFloor

DEBATE - The House proceeded with forty minutes of debate on H.R. 5236.

May 8, 2018 • 2:48 PM

HouseFloor

Passed/agreed to in House: On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote.(text CR H3810-3811)

May 8, 2018 • 2:57 PM

HouseFloor

On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote. (text CR H3810-3811)

May 8, 2018 • 2:57 PM

HouseFloor

Motion to reconsider laid on the table Agreed to without objection.

May 8, 2018 • 2:58 PM

SenateIntro Referral

Received in the Senate and Read twice and referred to the Committee on Small Business and Entrepreneurship.

Small Business and Entrepreneurship Committee

May 9, 2018

Floor Debate

4 members

What members said about H.R. 5236 on the floor

1 Republican3 Democrats

Rep. Anna G. EshooD-CA-18 · Jan 24, 2017

Mr. Speaker, I rise in support of H.R. 582, Kari's Law Act of 2017. H.R. 582 addresses a very serious problem. The bill requires Multi- Line Telephone Systems to provide direct dialing to 9-1-1. The…

Mr. Speaker, I rise in support of H.R. 582, Kari's Law Act of 2017.

H.R. 582 addresses a very serious problem. The bill requires Multi- Line Telephone Systems to provide direct dialing to 9-1-1. The bill is named after Kari Hunt who was tragically murdered by her estranged husband in a hotel room while her daughter tried to dial 9-1-1 but could not get help because the Multi-Line Telephone System required a prefix to be dialed first.

When we dial 9-1-1 from a hotel or office--when seconds matter--we shouldn't have to dial ``9'' or some other prefix to get help. I strongly support the overall goals of this bill which is identical to legislation passed by the full House in the 114th Congress by voice vote.

I also think location accuracy for Multi-Line Telephone Systems is just as important. First

responders have to know exactly where an individual is calling from, especially if the caller is unable to communicate to the dispatcher, or the caller simply doesn't know where they are. If first responders have to spend time searching buildings or going door to door, the time it takes to do this can be the difference between life and death.

During the subcommittee and full committee markups of this legislation in the last Congress, I offered an amendment to require a location accuracy proceeding at the Federal Communications Commission (FCC) within 180 days of enactment of the bill. Unfortunately, my Republican colleagues did not agree to accept my amendment and instead proposed language requiring the FCC to conduct a Notice of Inquiry (NOI) to solicit public comment on requiring location accuracy for Multi-Line Telephone Systems. I did not accept this proposal because I thought and still do, that an NOI does not move the ball forward. That view is shared by the FCC and the public safety community.

The FCC has studied location accuracy technology for Multi-Line Telephone Systems since 1994, and as recently as 2012, Congress directed the FCC to issue a Public Notice Seeking Comment on the feasibility of Multi-Line Telephone Systems to provide the precise location of a 9-1-1 caller. This was included in Section 6504(b) of the Middle Class Tax Relief and Job Creation Act of 2012 and was modeled on legislation I introduced with my colleague and fellow bipartisan Co- Chair of the NextGen 9-1-1 Caucus, Representative Shimkus, known as the Next Generation 911 Advancement Act of 2012.

Despite the extensive history surrounding location accuracy, the FCC has failed to take action to require this essential technology in Multi-Line Telephone Systems. Not doing so places lives at stake in my view.

Last Congress, I introduced H.R. 5236, the Requesting Emergency Services and Providing Origination Notification Systems Everywhere (RESPONSE) Act, which would require the Federal Communications Commission to complete a proceeding requiring all Multi-Line Telephone Systems to provide first responders with the precise location of a 9-1- 1 caller. I intend to reintroduce the RESPONSE Act in this new Congress and I'm hopeful my colleagues will work with me to pass this important bill and build on the work of H.R. 582.

Although H.R. 582 does not address the critical issue of location accuracy, it is nonetheless a step in the right direction that will save lives and make progress. For these reasons I urge my colleagues to join me in supporting H.R. 582.

Rep. Steve ChabotR-OH-1 · May 8, 2018

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 5236) to expand opportunities available to employee-owned business concerns through Small Business Administration loan programs, and…

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on the bill under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, ownership structures of businesses come in numerous shapes and sizes. Whether they follow a traditional model or an employee-owned structure, small businesses across the Nation continue to face a difficult lending environment.

Although the SBA bridges the gap for many of the Nation's small firms, 100-percent-employee-owned firms face uncertainty as they navigate the SBA's 7(a) Loan Program.

To strengthen the 7(a) Loan Program for employee-owned small businesses and worker cooperatives, Ranking Member Velazquez introduced H.R. 5236, the Main Street Employee Ownership Act of 2018.

In order to provide clarity for program participants, H.R. 5236 would update reporting statistics to ensure accurate data is captured.

The bill also codifies ownership transition plans.

Additionally, H.R. 5236 requires the SBA's resource partners to have educational material available to explain the nuances of these uniquely structured businesses.

Although the requirements for personal guarantees within the 7(a) Loan Program prove challenging to some of these business structures, H.R. 5236 importantly preserves this hallmark and requires the SBA to work with industry representatives to develop ways to satisfy the guarantee while reducing its burdens.

Employee-owned small businesses are an important part of the small business ecosystem. We must continue to streamline the processes and procedures in place at the SBA for all small businesses. H.R. 5236, Ms. Velazquez's legislation, is a step in the right direction that provides clarity for employee-owned small businesses and worker cooperatives.

Mr. Speaker, I want to thank the ranking member, Ms. Velazquez, who has spearheaded this legislation.

I urge my colleagues to vote ``yes'' on H.R. 5236, and I reserve the balance of my time.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I will conclude by saying that employee-owned businesses really populate the streets and neighborhoods of many cities across this Nation. They are unique in form but face many of the same hurdles that other small businesses face.

H.R. 5236 streamlines how employee-owned businesses operate under the important rules of the SBA 7(a) Loan Program. While preserving important characteristics of the program, H.R. 5236 will help employee- owned businesses as they seek capital to grow, expand, and create much- needed jobs.

Mr. Speaker, I want to again thank and commend the ranking member, Ms. Velazquez, for her leadership on this legislation.

I would urge my colleagues to support H.R. 5236, and I yield back the balance of my time.

Rep. Nydia M. VelázquezD-NY-7 · May 8, 2018

Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in support of H.R. 5236, the Main Street Employee Ownership Act, a commonsense measure to improve SBA's lending and…

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in support of H.R. 5236, the Main Street Employee Ownership Act, a commonsense measure to improve SBA's lending and training programs to enable employees to purchase the companies they work for.

As baby boomers near retirement, the country faces a substantial dilemma: Roughly half of privately held companies are owned by baby boomers, and fewer than 15 percent have a formal exit plan in place. And while it is wonderful to think that family members will take over the business, this is a relatively rare occurrence. Some will be bought out; others will close. This will have significant secondary economic impacts that will ripple through our local communities.

Mr. Speaker, I have been working with Senator Gillibrand's office to help address this looming problem.

The bill before us will reward workers and invest in our Main Street economy by improving the lending landscape for employee-owned businesses, such as employee stock ownership plans and co-ops.

There are 7,000 such companies in existence all over the Nation, contributing to our local communities and economies. However, businesses seeking to transition to employee-owned status face difficulty in obtaining adequate capital to cover the oftentimes prohibitive costs.

The SBA was authorized to loan to ESOPs in 1979. Unfortunately, this tool has rarely been used due to misunderstanding of the business structure and cumbersome transition requirements.

This bill seeks to align common industry practices with SBA protocols to encourage more lending to ESOPs and co-ops. By codifying current SBA standards of practice and easing some burdensome guarantee restrictions, it is my hope we will keep local enterprises in their communities, saving jobs along the way and preventing economic dislocation for many workers.

Mr. Speaker, I urge Members to support this legislation, and I reserve the balance of my time.

Mr. Speaker, I yield 2 minutes to the gentleman from Colorado (Mr. Polis).

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, there is no question that we need to support our Main Street small businesses, especially those that fall outside of traditional business structures. H.R. 5236 does just that by requiring more training and clarifying lending protocols.

Today's bill is endorsed by at least 25 organizations, including America's SBDCs, the American Sustainable Business Council, the Association for Enterprise Opportunity, ESCA, and a variety of co-ops and employee-owner associations.

Mr. Speaker, I would like to thank Justin Pelletier and Jon Cardinal for their tireless work on this complex topic.

Mr. Speaker, I urge Members to support this bill, and I yield back the balance of my time.

Rep. Jared PolisD-CO-2 · May 8, 2018

Mr. Speaker, I thank the gentlewoman from New York for yielding me time. Mr. Speaker, I rise in support of H.R. 5236, the Main Street Employment Act of 2018, that will help employee-owned companies.…

Mr. Speaker, I thank the gentlewoman from New York for yielding me time.

Mr. Speaker, I rise in support of H.R. 5236, the Main Street Employment Act of 2018, that will help employee-owned companies.

Employee ownership is an important part of helping workers build wealth. In addition to the income gap in this country, we also have a wealth gap. When a company does well, everybody should do well, not just the investors.

This bill helps promote employee-owned businesses by making changes to the Small Business Administration's loan program that helps employee-owned businesses access capital. It is currently a barrier in the rules that actually gives a disadvantage to employee-owned businesses, when, as a society, as a Nation, we should be encouraging employee ownership.

The SBA Loan Guarantee Program is often the only financing that many small businesses can get early on to get off the ground. This bill would open up SBA lending for cooperatives, which we often call co-ops, and also strengthens the lending program for ESOPs, which is another form of employee-owned company.

There is a very successful ESOP in the district I am honored to represent called New Belgium Brewery that makes among the best beer in the world.

This bill also creates a small business employee ownership and cooperative program, which helps employers and employees understand how to create employee-owned businesses, providing some of the help for succession planning, coordinating with other programs

to help employee-owned businesses succeed.

Employee-owned businesses are anchor businesses in our communities. They provide good, stable jobs and help employees build value and wealth over time and participate in the governance of the company. They align the incentives of workers with owners and management and are good for overall economic productivity as well.

This bill builds on the bipartisan language that I helped secure in the omnibus appropriations bill directing the SBA to encourage employee ownership. Passing this bill will make those changes in the 1-year spending bill that expires September 30 permanent.

Mr. Speaker, I encourage all Members to support this very important piece of bipartisan legislation.

Bill Text

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Referred in SenateIssued May 9, 2018

IIB

115th CONGRESS

2d Session

H. R. 5236

IN THE SENATE OF THE UNITED STATES

May 9, 2018

Received; read twice and referred to the Committee on Small Business and Entrepreneurship

AN ACT

To expand opportunities available to employee-owned business concerns through Small Business Administration loan programs, and for other purposes.

Short title

This Act may be cited as the Main Street Employee Ownership Act of 2018.

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, 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 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).

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, shall 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)

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 an entity that is determined to be a cooperative by the Administrator, in accordance with applicable Federal and State laws and regulation.

(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.

Small business investment company program outreach

The Administrator shall provide outreach and educational 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 investments in company transitions to employee-owned business concerns.

Small business microloan program outreach

The Administrator shall provide outreach and educational 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 concerns, including transitions to employee-owned business concerns.

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.

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)

publish a report on the activities of the interagency working group that is indexed and maintained 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.

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;

(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.

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 incompatible with the business structure of cooperatives.

(b)

Study and report

(1)

Study

The Administrator, in coordination with lenders, stakeholders, and Federal agencies, shall study and recommend practical alternatives for cooperatives that will satisfy the loan guarantee requirements of the Administration.

(2)

Report

Not later than 120 days after the date of enactment of this Act, the Administrator shall submit to Congress the recommendations developed under paragraph (1) and a plan to implement such recommendations.

10.

Amendment to definition of qualified employee trust

Section 3(c)(2)(A)(ii) of the Small Business Act (15 U.S.C. 632(c)(2)(A)(ii)) is amended to read as follows:

(ii)

which provides that each participant is entitled to direct the plan trustee as to the manner of how to vote the qualified employer securities (as defined in section 4975(e)(8) of the Internal Revenue Code of 1986), which are allocated to the account of such participant with respect to a corporate matter which (by law or charter) must be decided by a vote conducted in accordance with section 409(e) of the Internal Revenue Code of 1986; and

Passed the House of Representatives May 8, 2018.

Karen L. Haas,

Clerk.