Answer: The two types of ESOP financing structures are:

1) Leveraged - A loan is used to purchase a block of shares.

2) Non-leveraged - A company contributes cash to purchase shares in the future (or contributes shares directly) that are then allocated to plan participants.

Depending on how much of the company will be sold, an ESOP transition can be funded in a couple of ways. In most ESOP transactions, the company will borrow from a bank to fund a portion of the transaction. If the owner(s) want to sell 100 percent of the company in one transaction, the value beyond what is available from third party financing sources is often financed by a seller note. EOX National Service Provider SES ESOP Strategies explains more about how each of these financing structures work.

For more information: https://sesesop.com/service/esop-financing/