The objective of this program is to provide financial assistance to Employee Stock Ownership Plans. The employee trust must be part of a plan sponsored by the employer company and qualified under regulations set by either the Internal Revenue Service Code (as an Employee Stock Ownership Plan or ESOP) or the Department of Labor (the Employee Retirement Income Security Act or ERISA). Applicants covered by ERISA regulations must also secure an exemption from Department of Labor regulations prohibiting certain loan transactions.
Loan Amounts Available for Qualified Employee Trusts Loans
Effective December 22, 2000, a maximum loan amount of $2 million has been established for 7(a) loans; however, the maximum dollar amount the SBA can guarantee is generally $1 million. Small loans carry a maximum guarantee of 85 percent; loans are considered small if the gross loan amount is $150,000 or less. For loans greater than $150,000, the maximum guarantee is 75 percent.
Who is Eligible for a Qualified Employee Trusts Loan?
The SBA can assist qualified employee trusts that meet the requirements and conditions for an ESOP as prescribed in all applicable IRS, Treasury, and Department of Labor regulations. The small business must provide all the funds needed to collateralize and repay the loan. A qualified employee trust may:
- re-lend proceeds to the employer by purchasing qualified employer securities, or
- purchase a controlling interest in the employer.
SBA Loan Maturities
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Guarantee Percent
