--- title: New Jersey Will Lend Business Owners the Money to Sell to Their Workers description: New Jersey's new law lets owners finance a sale to their employees, joining a small but growing group of states backing worker ownership. author: Darie Nani (Editor-in-Chief) date: 2026-09-23T21:15:49.579Z updated: 2026-09-23T21:15:49.587Z canonical: https://www.sovereignmagazine.com/article/new-jersey-employee-ownership-loan-fund-esop image: https://cdn.nanimediahouse.com/pexels-two-engineers-collaborating-on-machinery-maintenance-in-a-di-37668543.jpg categories: Business content_type: Analysis region: United States publication: Sovereign Magazine schema_type: Article --- Owners in New Jersey who want to sell to their employees rather than to a competitor or a private equity buyer now have a public lender to turn to. On September 4, 2026, Gov. Mikie Sherrill signed bipartisan legislation, bills A5016 and S4218, that gives the New Jersey Economic Development Authority the tools to finance the conversion of a business to employee ownership. The measure sets up an Employee Ownership Revolving Loan Fund that can lend directly against a conversion, and an Employee Ownership Transition Program that reimburses the cost of feasibility studies, provides consultative help to firms making the switch, and funds statewide outreach in partnership with the NJ/NY Center for Employee Ownership at Rutgers University. Selling a business to employees, whether through an employee stock ownership plan or a worker cooperative, usually depends on the owner finding a lender willing to underwrite a deal in which the buyers are the workforce, and that is the gap the new fund is meant to fill. The state says the loan program will finance conversions directly, and the transition program will help cover the professional-service costs, such as feasibility work, that often stop an owner before a deal is ever structured. ## New Jersey Used the Same Loan Tool 50 Years Ago, and It Paid Off According to the announcement, NJEDA first used this kind of loan about half a century ago, when it financed the employee buyout of the Okonite Company in Passaic County. The state says that first loan was repaid and then revolved ninefold, recycling into further lending. Okonite, a wire and cable maker, remains 100% employee-owned and has paid more than $300 million in ESOP distributions to its workers, the state says. Okonite's own site says it [became the largest company in the United States to be owned by its employees](https://www.okonite.com/about) through an Employees' Stock Ownership Trust. The Okonite loan is a proof of concept. It does not show how many deals a revived fund will produce today. ## New Jersey Is Following States That Have Already Built These Programs The law places New Jersey inside a cluster of states that have moved to promote employee ownership since the end of the last decade. According to the [National Center for Employee Ownership](https://www.nceo.org/what-is-employee-ownership/state-legislation-esops-employee-ownership), California signed the California Employee Ownership Act in September 2022, Massachusetts created an employee ownership center through its 2019 budget, and Washington's legislature passed a bill, S.B. 5096, to expand the practice. The closest parallel to what New Jersey just did is Colorado, which between 2019 and 2020 set up an Employee Ownership Commission and Office, created a tax credit worth $10 million a year toward the professional-service costs of converting, and established a revolving loan program for worker cooperatives and ESOPs using federal State Small Business Credit Initiative funds. New Jersey's design was informed by a state policy playbook, "Employee Ownership as Economic Development," published by the Lafayette Square Institute. The bet across these states is the same: a wave of retiring owners will need a succession option, and public financing can steer some of those sales toward the workforce instead of an outside buyer. ## The Open Question Is Whether the Financing Moves Deals These state programs are recent, most enacted between 2019 and 2026, and they remain modest next to the volume of businesses that change hands each year. ESOP conversions and cooperative buyouts are still a small share of that activity, and setting up a fund does not by itself change the math on any individual sale. The bill's sponsors, State Senators Andrew Zwicker and Shirley Turner and Assemblymembers Lisa Swain, Roy Freiman, and Al Barlas, have created the lending capacity. Whether owners use it in numbers that matter will show up in how much of the fund actually lends out and revolves, the same test the Okonite loan passed a generation ago. For now, an owner in New Jersey who wants to sell to employees has a state lender and a state-funded feasibility subsidy to draw on, where before there was neither. What the program cannot yet show is how many owners will take the offer. ## FAQ **Q: What is employee ownership?** It is an arrangement in which a company's workers hold an ownership stake in the business. The most common form in the United States is an employee stock ownership plan, or ESOP, a trust that holds shares on behalf of employees. Worker cooperatives, owned and governed by their members, are another form. **Q: Where will the loan fund get its money?** The revolving fund does not start with a fixed pot of cash. According to the announcement, it can be capitalized by state appropriations, federal sources such as U.S. Economic Development Administration grants, and philanthropic capital. How much it can lend, and how soon, will depend on how much of that capital it actually draws in.