Your employees can own the firm you built—and you get paid 100% cash at closing with SBA-backed financing.

Successfully selling your A/E/LS firm to key employees without an ESOP starts with disciplined, multi-year planning. Your trusted employees hold the knowledge and relationships critical to your firm’s future, but they need a bankable and SBA-friendly deal structure to become owners seamlessly.

Step 1: Leadership Grooming & Financial Cleanup (Years 1-2)
Start identifying and mentoring your senior technical and business leaders who can take over ownership roles. Simultaneously, rigorously document project backlog, client contracts, work-in-progress, and retention guarantees. Transparent and detailed financials increase lender confidence and help maximize firm valuation multiples, which currently average around 3.2 to 5.25x EBITDA in A/E markets.

Step 2: Formalize Client Retention & Risk Mitigation (Years 2-3)
Secure long-term client commitments through contracts and guarantees that stabilize recurring revenue. Lending institutions value contract-backed cash flows for SBA 7(a) loan approvals, reducing perceived deal risk and supporting stronger valuation metrics.

Step 3: Early Bank Engagement & Financing Strategy (Years 4-6)
Partner early with SBA-approved lenders experienced in financing A/E/LS employee buyouts. The SBA 7(a) program allows your employees to finance up to 90% of the purchase price with around 10% down, despite recent rate increases to 10.5%-15.5% for 2025 loans.

• Why the Step-Up Legacy Plan™ works: Unlike costly ESOPs that may require >$150K setup fees and involve ongoing trustee expenses, this plan delivers near 100% cash upfront to sellers and eliminates the need for seller financing or personal guarantees.
• Legacy protection: Employee owners familiar with your culture and client base preserve business continuity amid growing private equity interest and market consolidation pressures.
• Financial security: Receiving full or near-full payment at closing reduces seller risk and accelerates retirement funding—key in uncertain markets with rising interest rates.

Across the US, SBA lending remains robust for carefully structured deals, especially for firms with revenues between $1 million and $8 million. SBA loan caps remain at $5 million, suitable for most A/E/LS purchases. Preparation that highlights financial transparency and client contract strength is critical under tighter underwriter scrutiny following 2024-2025 regulatory updates.

Implementing this transition plan requires focused steps to turn the vision into reality and avoid the common pitfalls of employee buyouts.

Prepare your employees: Leadership candidates must be coached on ownership responsibilities and have a credible financial profile. Groom them early to build confidence with lenders.

Clean your financial records: Sharpen documentation including backlog, WIP, and precise retainer agreements. SBA lenders prioritize clean, recurring revenue streams and evidence of client retention.

Formalize client contracts: Enforceable, multi-year client agreements and retention guarantees significantly lower lender risk perception, increasing financing approval chances and boosting valuation.

Engage lenders early: SBA underwriting in 2025 requires rigorous creditworthiness checks, citizenship verification, and adherence to debt service coverage ratios. Early conversations with SBA-approved banks help tailor the financing structure and avoid surprises close to closing.

Avoid seller financing traps: Recent SBA policy changes limit seller carrybacks and personal guarantees. The Step-Up Legacy Plan™ bypasses these risks by securing bank financing that pays sellers at closing, providing seller liquidity and peace of mind.

Consider market timing: Current A/E/LS M&A markets show steady valuation multiples from 3x to 9x EBITDA depending on geography and niche specialty. Rising interest rates increase cost but careful deal structuring preserves value.

• Cost savings: Compared to ESOPs, which often exceed $150K-$300K upfront plus ongoing trustee fees, this plan is a fraction of the cost, reducing complexity and run-time delays.
• Legacy impact: Keeping ownership within your trusted team prevents culture disruption and retains client confidence, ensuring sustainable growth post-transition.

Case studies from 2024-2025 show firms that followed this roadmap avoided seller-held notes, closed deals in under 9 months, and delivered full retirement funding without tying up sellers' capital. Allen Business Advisors specializes in guiding A/E/LS firms through this tailored process, combining expert banking knowledge with industry-specific succession insights.