To help address perpetuation challenges faced by many of the nation’s privately held small businesses, the “Main Street Employee Ownership Act” was included in a larger legislative package enacted earlier this month.

Championed by Rep. Nydia Velazquez (D-New York) in the U.S. House of Representatives and Sen. Kristen Gillibrand (D-New York) in the U.S. Senate, the law aims to improve access to capital and technical assistance for transitioning small businesses to employee ownership.

While more than half of small business owners expect to retire in the next 10 years, fewer than 15% have a formal exit plan in place, and only a small percentage of these businesses will be passed on to family members. The intent of the new law is to help create perpetuation options for small business, and to reward employees who contribute to business growth by making it easier to set up employee stock ownership plans.

The new law also expands the Small Business Administration’s 7(a) loan program. Under the law, a small business could use the proceeds of SBA-guaranteed loans to make loans to certain qualified employee trusts, enabling the trust to hold a majority stake in the small business. The law also directs the SBA to provide training, outreach and educational materials to participants in several SBA programs that focus on transitioning a small business to an employee-owned business.

Jennifer Webb is Big “I” federal government affairs counsel.