There are various alternative financing sources for transactions involving ESOP-owned companies. Transactions can be related to initial ESOP transactions, partial-to-full ESOP transactions, growth initiatives/acquisitions, or for a myriad of other purposes. The type of alternative capital chosen depends on many things including the amount of capital needed, the company’s cash flow/collateral coverage, strategic objectives, and uses of the capital. There are also certain considerations for key stakeholders before seeking these alternatives.

Why is There a Need for Alternative Financing?

When pursuing an ESOP transaction (or any type of balance sheet recapitalization), alternative financing sources may need to be explored beyond traditional financing sources. This could be for a variety of means. First, a larger amount of capital or liquidity may be sought which could trigger the need to speak with alternative capital providers…