Your engineering firm’s trusted employees know the culture, clients, and projects better than anyone. With 2025 SBA loan updates and the practical Step-Up Legacy Plan™, they can become full owners while you receive 100% cash at closing, preserving your legacy and securing funds for retirement.
This plan remains a superior alternative to costly ESOPs, eliminating seller financing risk and reducing setup complexity. By aligning leadership development, financial transparency, and bank partnerships, it creates a bankable roadmap for a smooth, legacy-preserving ownership transition.
Updated SBA 7(a) loan guarantee fees and interest rates (currently around 10.25% to 13.75% depending on loan size) continue to support employee buyouts for firms with $1M to $8M revenue, making this an ideal time to act on a 5-7 year succession plan.
The Step-Up Legacy Plan™ delivers 100% cash at closing and empowers trusted employees to own your engineering firm with strong SBA-backed financing.
Successful succession planning for an engineering firm in 2025 requires a deliberate multi-year strategy focused on leadership grooming, financial clarity, and structured bank financing. The Step-Up Legacy Plan™ leverages current SBA 7(a) loan programs to make employee buyouts practical and lucrative for owners seeking cash payment upfront.
Step 1: Leadership Development & Financial Cleanup (Years 1–2)
Identify senior, high-potential employees ready to grow into ownership roles. Clean and document your firm's financials — project backlog, work-in-progress (WIP), client contracts, and retainer agreements must be transparent, as SBA lenders prioritize stability and recurring revenue streams. Detailed documentation builds lender confidence and maximizes your firm’s valuation.
Step 2: Client Contract Strengthening & Risk Mitigation (Years 2–3)
Formalize client agreements and retention guarantees. These reduce perceived deal risk, enabling SBA lenders to offer financing with more favorable terms. Lenders’ familiarity with A/E firm revenue models is improving, especially when contracts underpin controlled cash flow.
Step 3: Early SBA Bank Engagement & Customized Financing Design (Years 4–6)
Engage SBA-approved lenders experienced with A/E sector buyouts early. SBA 7(a) loan programs provide up to 90% financing with modest down payments (around 10%). Current SBA guarantee fees have eased slightly, and interest rates for 2025 typically range between 10.25% and 13.75%, making cash-flow-driven buyouts feasible.
Compared to ESOPs, whose transaction costs range from $75,000 to upwards of $1 million and involve ongoing trustee oversight, this plan focuses on efficiency and certainty. Given current SBA loan approval rates trending higher at smaller banks and stable financing appetite despite a challenging credit market, disciplined preparation can unlock strong deal outcomes.
The firm highlighted in this updated case study successfully navigated a 5-7 year succession timeline, resulting in a fully bank-financed employee buyout. This sale preserved legacy and culture, delivering seller liquidity with no personal guarantees or seller notes required.
Structured early, the Step-Up Legacy Plan™ enables employee ownership transitions that maximize seller cash and secure firm continuity.
Implementation success depends on disciplined execution. Here’s how owners can start today:
By following this roadmap, engineering firm owners can avoid common pitfalls such as seller financing traps and lengthy ESOP complexities. The Step-Up Legacy Plan™ positions your firm for a smooth and financially secure transition that rewards your trusted employees and honors the firm’s culture.
The 5-7 year planning horizon enables gradual risk reduction and deal optimization, increasing buyer creditworthiness and ensuring maximum payout at closing. Recent SBA data confirms higher approval rates at smaller banks that understand niche professional services, reinforcing the viability of this approach.
Reach out to Allen Business Advisors today to tailor this framework to your firm’s unique circumstances and set a confident course for your ownership succession.
Your engineering firm’s legacy deserves a thoughtful plan that maximizes value and delivers full cash at closing. The Step-Up Legacy Plan™ combined with current SBA financing is a proven path for owners wanting to empower trusted employees and secure their retirement.
Starting a disciplined 5 to 7 year succession process today positions you to build strong leadership, optimize financial disclosures, and engage lending partners familiar with your industry’s nuances.
Contact Allen Business Advisors to learn how this updated strategy can protect your firm’s culture and deliver a legacy-rich exit on your terms.
