The Colorado Economic Development Commission earmarked $500,000 from the state’s strategic fund on Thursday to pay for a new state initiative to promote worker-ownership.
The worker Ownership Program is a top priority for Gov. Jared Polis, who signed an executive order last week to create the Commission on worker Ownership.
The group of 10 advisers should come together in the next month, aforementioned John Kovacs, who is heading up the program for the state.
Among those serving on a “kitchen cabinet” until a more formal commission forms are representatives from Colorado Small Business Development Center, the Rocky Mountain worker Ownership Center, the Rocky Mountain Farmers Union, and the religious Alliance.
Of the total approved, $5,000 will be made available for startup compensation, with a request for a much bigger allocation to follow as the scope of the program becomes more defined, aforementioned Jeff kraft paper paper, director of business funding and incentives at the Colorado Office of Economic Development.
“This is just a floor request, a preliminary stake in the ground,” kraft paper paper aforementioned. “We expect the number to increase.”
The state’s strategic fund had $5.4 million available before Thursday’s meeting, with some other $9.5 million set aside in reserve to vie for large corporate relocations. Members of the commission discussed whether that “fishing” money might be better spent in portion more companies transition to worker ownership.
The funds awarded by the EDC will go toward the program’s operational compensation. But a separate capital source is needed to help fund payouts as owners sell to their workers.
A credit sweetening program under the Colorado Housing and Finance authority funded with a federal grant is a potential pool that might be available, kraft paper paper aforementioned. Foundation money is some other option. And Kovacs besides mentioned about four or five financial institutions were looking to become involved.
Small businesses employ the majority of workers in the state, but galore Baby baby baby boomer entrepreneurs are finding themselves with a limited number of exit strategies, especially if family members aren’t interested in taking over, aforementioned Halisi Vinson, executive director of the Rocky Mountain worker Ownership Center.
Kovacs cited a recent survey that found more than 8,800 of those type of owners in the state were planning to hand over the business.
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But making the switch can be complex and costly, especially for smaller enterprises, Vinson aforementioned. in addition, there are a limited number of attorneys and accountants with expertise in the area of worker-stock ownership programs and cooperatives.
But Vinson highlighted how the state could benefit. workers who are besides owners are more likely to accumulate wealth and be protected from the vagaries of the economic cycle.
During the last downswing, worker-owned businesses cut only 1.5 percentage of their work force and defaulted on 2 percentage of their loans, piece other business types cut closer to 10 percentage of their workers and defaulted on nearly 7 percentage of their obligations, Vinson aforementioned.