Services
Patient Capital for Long-Term Operators
Investment Philosophy
We provide equity financing designed for long-term value creation, not forced exits. By structuring our investments around free cash flow distributions rather than traditional private equity timeframes, we align our incentives with yours as an operator building an enduring business.
Deal Structure
Small Capital typically invests $250K-$750K in preferred equity alongside your bank debt and seller financing. Our capital reduces your overall debt burden, improves your debt service coverage ratios, and creates flexibility for operational growth. With progressive redemption into employee ownership, our structure creates immediate profit-sharing opportunities for your workforce.
Pragmatic Employee Ownership
We handle the complexity of implementing employee ownership while you focus on operations. Working with established partners like Common Trust, we create cost-effective ownership structures that drive business performance without administrative burden. You maintain control while your employees gain meaningful financial participation.
Investment Criteria
We focus on stable, profitable businesses with proven track records. Ideal opportunities have less than $10M in revenue, 10%+ EBITDA margins, and 10+ years of operating history. We prioritize businesses where a significant portion of employees have long-term tenure, indicating stability and opportunity for successful employee ownership.
The Ownership Incentive
With Small Capital, your employees gain direct financial participation in the business's success through regular profit sharing. This creates powerful operational improvements as employees begin thinking and acting like owners—making decisions that reduce costs, improve customer satisfaction, and drive revenue growth.
See if your deal fits
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10%
increase in pay
We underwrite to achieve a 10% increase in income for employees, directly tied to business performance.
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$2M
employee profit share
We target at least $2M in increased income for your employees within 15 years, aligning their incentive with business performance.
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6X
better longevity
A company that converts to employee ownership has a 6X better chance of surviving 40 years.
Building Wealth for the Next Generation of American Small Business
SmallCapital was founded to address the massive transition of small business ownership happening across America. With millions of owners approaching retirement and seeking succession solutions, we saw an opportunity to reimagine how these businesses change hands—creating structures that benefit acquirers, sellers, employees, and communities alike.
Our founders combine deep experience in fund management, entrepreneurship, and employee ownership implementation. We've witnessed firsthand how businesses with aligned incentives outperform their competitors, and how shared ownership creates resilience through economic cycles.
SmallCapital's mission is to create the most scalable platform for employee ownership transitions in America. We envision converting 50,000 businesses to employee ownership over time, creating meaningful wealth for over one million workers while preserving the legacy of successful small businesses.
Invest
Small Capital provides equity financing for small business acquirers planning for long-term ownership.
Own
We work together to pick the cost effective employee ownership format that works for your business.
Share
Small Capital receives a portion of free cash flow, sharing profits with employees. With each payment, we redeem a portion of our equity into employee ownership.
For Life
Your employees become co-owners, driving measurable improvements to margins, productivity, and retention.
Questions
Questions Searchers Ask About Our Performance-Enhancing Capital Model
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Unlike traditional search fund equity that relies on eventual exits (often 5-7 years), our structure focuses on ongoing distributions from free cash flow. We target similar overall returns (typically a 2x multiple) but achieve them through regular payments that simultaneously transfer our equity to employees. This creates better alignment and doesn't require a forced exit to generate investor returns.
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We use redeemable, preferred equity that is transitioned to employee ownership as we receive distributions from free cash flow. Employees do not need to provide their own capital.
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We handle the complexity while you focus on operations. Working with technical assistance partners, we design and implement the appropriate structure concurrent with your acquisition closing. The implementation includes legal documentation, employee communication materials, and ongoing administration tools. We focus on low cost employee ownership structures.
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Not at all. We regularly engage with searchers who have deals under LOI and even help renegotiate terms when beneficial. The ideal time to connect is when you've identified a target but before finalizing financing, allowing us to help optimize your capital structure. However, we can adapt to your timeline at any stage.
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Because we redeem equity gradually through free cash flow and transfer ownership to employees, Small Capital provides a significantly lower overall cost of capital compared to traditional private equity. Specific costs depend on your business's cash flow and profitability, but our structure consistently reduces your financial burden relative to conventional equity and debt financing.
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No. Our model is designed specifically for long-term operators who value control and stability. We never force premature exits or operational changes. You remain in control as CEO, operating the business according to your strategy, while our equity steadily converts into employee ownership, improving alignment and business performance.
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Employee ownership is attractive to retiring sellers who want their legacy to continue. It reassures them that their employees will be rewarded and their business preserved. Highlighting employee ownership can differentiate your offer, making you more likely to win deals even in competitive situations.
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Yes, our equity is specifically designed to complement SBA and conventional lending. By lowering your overall debt burden, we help you improve debt-service coverage ratios and strengthen your overall financing structure.
