Funding Employee Ownership
Are you looking For Investment?
Capital for Colleagues is investing in growing EO businesses. We invest between £100,000 and £1m into companies on a long-term basis.
Employee owned businesses typically need funding for two purposes:
- To support working capital and business growth
- Succession - to enable owners to sell their shares and get their money out of the business
You may be able to secure such funding from mainstream sources, however there are a number of other routes available to support the move into employee ownership:
- FUNDING FROM THE COMPANY: there may be enough cash within the company to finance all or part of the purchase price, either in one lump sum or over a period of years.
- FUNDING BY EMPLOYEES: employees raise funds from their personal resources. They may be given incentives to do this by being awarded special shares or additional rights not available to later employees. However employees must realise that money can be tied up for a long time.
- GIFTING SHARES: where the owners, over a period of time, gift shares to employees, often through an Employee Owned Trust (EOT), thereby saving the company the burden of finance interest and repayments.
- VENDOR FINANCE: where an entrepreneur, founder, management team or a family are selling a business, they may be prepared to take their cash over time. This results in deferring payment over part of the sale price.
- LOAN FINANCE: borrowing from a third party, such as a bank, can form part of the purchase price. Normally the lender will take security for its loan over the company’s assets and will require priority for its money over any other provider of funds.
- MAEZZANINE FINANCE: funding from a finance house which is prepared to take a greater deal of risk than a high street bank and so requires a greater rate of return.
- CROWD FUNDING: this enables companies to raise both loans and equity investment. Careful consideration needs to be given to the platform provider as many specialise in certain sectors.
Capital for Colleagues (C4C)
Capital for Colleagues understands the challenges faced by moving to and growing employee owned businesses and can provide the following types of financial support:
- Long term patient capital
- An investment to buy some shares from exiting owners to make the transition to employee ownership
- Secured loans and short term working capital for existing EO businesses to grow
- Liquidity to enable the buying and selling of shares in EO companies