How are ESOP transactions actually financed?

In Part 5 of the ESOP Boot Camp series, Trevor Gilmore, CEO of Menke, explains the two primary ways ESOPs are financed: outside bank financing and seller financing—and how those approaches are often combined in practice.

Using real-world examples, this episode walks through how lenders evaluate ESOP transactions, what makes a company “bankable,” and how seller notes can function as a long-term liquidity and estate-planning tool for selling shareholders.

Topics covered include:

• The two primary ESOP financing methods: bank financing and seller notes
• How lenders evaluate cash flow, coverage ratios, and financial quality
• Combining bank financing with seller financing in ESOP transactions
• Seller notes as long-term annuities for owners
• When all–seller-financed ESOPs can make sense
• The role of lender selection and ESOP-specific expertise

This episode is designed for owners, CEOs, and CFOs who want a clear, practical overview of how ESOP financing works before diving deeper into structure or transaction planning.