Your key employees already understand your firm's culture, clients, and project workflows inside and out. In 2025, updated SBA 7(a) loan limits and underwriting standards enable them to become owners with as little as 10% down payment, eliminating the need for sellers to carry financing or personal guarantees.
The Step-Up Legacy Plan™ leverages these financing changes to provide owners of architecture, engineering, and land surveying firms with revenues between $1M and $8M a reliable path to receive near 100% cash at closing. This makes employee buyouts a practical, legacy-preserving, and financially secure alternative to costly ESOPs or selling to third parties.
Despite rising SBA interest rates and evolving market dynamics, internal succession remains the best retirement strategy—offering control, culture protection, and competitive returns at closing.
Employee buyouts with SBA financing deliver legacy preservation and 100% cash at closing for A/E/LS firm owners in 2025.
Succession planning in 2025 requires a strategic 5 to 7 year approach that aligns leadership development, financial transparency, and bank engagement. The SBA’s reinstated 7(a) loan rules, effective June 1, have tightened underwriting but continue to support up to $5 million in financing with modest down payments, often about 10% of purchase price.
Step 1: Develop Leadership and Clean Financials (Years 1–2)
Identify and mentor your senior technical and business leaders who can transition into ownership roles. Concurrently, rigorously document your firm's backlog, work-in-progress (WIP), client contracts, and retainer arrangements. Transparent financials increase lender confidence and can improve valuation multiples, which currently range around 3x to 5x EBITDA in the A/E sector.
Step 2: Strengthen Client Contracts & Reduce Risk (Years 2–3)
Formalize client retention mechanisms and guarantees to reduce lender risk perception. SBA lenders prioritize contract-backed, stable revenue streams supporting buyouts. Strong contracts enable your employees to qualify for SBA financing more easily and enhance your firm’s valuation during the transaction.
Step 3: Early Bank Engagement & Financing Structure (Years 4–6)
Engage SBA-approved lenders experienced with A/E/LS employee buyouts early to pre-qualify candidates and negotiate financing. SBA 7(a) loans provide up to 90% financing, with terms up to 25 years when real estate is included. Interest rates for 2025 typically range from 10.25% to 13.75% depending on size and term.
This stepwise plan also leverages new SBA 7(a) program flexibility allowing sellers to remain employees, consultants, or minority equity holders post-transition, which smooths leadership handoffs and stabilizes operations.
Compared to increasingly costly and administratively complex ESOP structures, employee buyouts supported by SBA financing present a faster, cleaner path to liquidity and legacy success for smaller A/E/LS firms.
Recent case studies show high employee buyout success rates when owners prepare financial and leadership groundwork, and pursue bank engagement early. SBA approval trends remain favorable in 2025 despite rising interest rates because banks value transparent firms with strong client contracts and leadership continuity.
Despite rising private equity M&A activity in the A/E sector, internal buyouts offer owners maximum control over their succession outcomes and retirement proceeds while rewarding loyal employees who contributed to firm growth.
An SBA-financed employee buyout gives 2025 A/E/LS owners a legacy-preserving, 100% cash-at-closing exit that eschews ESOP costs and complexities.
Implementing a successful employee buyout requires disciplined preparation and timing. Begin with a clear 5-7 year timeline that phases key succession activities.
Throughout, communicate openly with your management team and stakeholders to align vision and build buy-in. The Step-Up Legacy Plan™ framework helps structure deals where employees put down minimal equity (~10%) but leverage SBA 7(a) loans covering 90%, with terms favorable for project-based revenue firms.
Owners receive near 100% cash upfront, freeing them from seller financing risk and accelerating retirement security. Employees gain meaningful ownership and leadership roles, preserving culture and client relationships long-term.
Professional advisors specializing in A/E employee buyouts and SBA lending can help owners navigate evolving 2025 regulations and market conditions to craft optimal deal structures.
Taking a proactive and disciplined approach today ensures a smooth transition tomorrow while maximizing value for both owners and employees in a competitive market.
Your A/E/LS firm’s future and your retirement security depend on a well-executed succession strategy that balances legacy preservation with financial certainty. The Step-Up Legacy Plan™ harnesses updated SBA 7(a) financing to enable owners to receive full or near-full payment at closing while transferring ownership to trusted employees.
Begin your 5 to 7 year succession roadmap now by assessing leadership, aligning financial transparency, and engaging specialized SBA lenders familiar with A/E/LS buyouts. Allen Business Advisors has the expertise to guide you through this updated landscape, helping protect your firm’s culture and maximize your payout.
Contact us today to explore how this proven approach can secure your firm’s legacy and your financial future with confidence.
