ESOP FINANCING

ESOP Financing

EMPLOYEE STOCK OWNERSHIP PLANS

Cole Taylor Bank’s national ESOP Finance Group specializes in providing middle market business owners with strategic financing for an employee stock ownership plan (ESOP).

An ESOP is a qualified defined employee benefit plan in which a company creates a trust for the employees and allocates shares to eligible employees' accounts, subject to vesting requirements. Participants normally receive the stock, or cash equal in value to the stock, after they leave the company or upon retirement.

ADVANTAGES TO BUSINESS OWNER

  • Establishment of a succession plan
  • Tax benefits
  • Diversification of net worth
  • Increased liquidity
  • Employee compensation

COLE TAYLOR EXPERTISE

Our ESOP Finance team consists of seasoned commercial lending experts who understand current market dynamics and the complexities of an ESOP. Given Cole Taylor Bank’s history as a family business with employee stock ownership, we offer a unique perspective of the challenges and opportunities an ESOP provides.

We collaborate with an extensive network of ESOP community partners to develop financing solutions that are customized for the unique needs of each business. With broad lending experience across a variety of industries, Cole Taylor is a reliable financing source for ESOP transactions.

Structures

  • Leveraged ESOP
  • Non Leveraged ESOP
  • Full and Partial Sale
  • Second Stage Transactions
  • Seller Note Refinance

   ESOPs - The Initial process

When an ESOP borrows money to buy company shares, it is called a Leveraged ESOP. The ESOP may own any percentage of the company’s shares and shares may come from the company and/or the selling shareholder(s).

Cole Taylor Bank provides Leveraged ESOP facilities (ESOP loans), typically structured as follows:

I. The Operating Company borrows funds from Cole Taylor Bank.
II. At the same time, a "mirror/internal" loan is established between the ESOP Trust and the Operating Company.
III. The ESOP Trust then uses the funds to purchase stock from existing shareholders, the Company or newly issued stock.
IV. The Operating Company makes annual, tax-deductible contributions to the ESOP Trust. The ESOP Trust then uses these contributions to make its loan payments to the Operating Company (mirror/internal loan).
V. The Operating Company then uses the funds to repay the loan issued from Cole Taylor Bank.

ESOP Financing Diagram

Get to know Cole Taylor

To learn more about ESOP financing, contact us today.

Pat Stoltz
Group Senior Vice President
847-653-7457

Eric Zaleski
Senior Vice President
847-239-2466

Jim Swabowski
Vice President
847-653-7462

Or email us:
ESOP@coletaylor.com