When company owners get ready to sell their businesses, what prevents them from considering an ESOP? Sometimes it’s just ignorance or bad advice; sometimes it’s a preference for a different kind of sale. But often it’s the fact that they can’t get an all-cash deal. Banks may fund part of the transaction, but sellers may find themselves taking back sizable notes of 5-10 years, with corresponding financial risk.

The result, say three employee-ownership financial experts, is that employee groups looking to fund a buyout can’t always compete on a level playing field with cash-rich large companies or other prospective buyers. Sellers may want or need all their money up front.

But there’s an elegant way around this obstacle, say American Working Capital’s Richard C. May, Robert Hockett, and Christopher Mackin in a recent white paper. A new Employment Equity Loan Guarantee program, funded by the US government, could provide (and create a secondary market in) loans to fund ownership transitions—provided the sale was to an ESOP or similar structure. (You can find a great pdf summarizing the proposal here and a video of two authors discussing the proposal here.)

Such a program has plenty of precedents. A series of Depression-era laws, for instance, put the government squarely on the side of home ownership by providing “credit insurance, quality controls, standardized mortgage instruments, and market liquidity”—all “so effectively that they converted the nation from below 40% to an above 65% home ownership rate.” The new program would put the government squarely on the side of employee ownership. In fact, points out EOA contributing editor Gellert Dornay (who himself founded an employee-owned mortgage company, Axia Home Loans), the Federal Home Loan Bank system isn’t doing much lending for home ownership these days, because banks have plenty of cash available. So maybe the FHLB could have its mission augmented to finance ESOPs.

There’s a powerful rationale for public action, May and his coauthors argue. Public companies, always on the lookout for short-term growth and (they hope) a boost in their stock price, have upped their rate of acquisition, concentrating more and more capital ownership in a relatively few hands. Private equity firms have evolved into a kind of farm league for these companies. The PE folks scout around for privately held businesses that they can snap up, fix up, and sell, typically within five years.

As a result, there’s a dearth of patient capital, the kind that’s required for long-term, game-changing investment and company building. Companies are bought and sold like pieces on a chessboard. At any time they may be moved or consolidated, undermining community stability.

The situation not only feeds inequality; it costs the nation dearly through lost jobs, lagging wages, and sluggish productivity growth. Over ten years, the authors estimate, a $100 billion-a-year loan guarantee program of the sort they propose “should be able to help create an additional 30 million employee owners…, add 3.4 million jobs in the US economy, and contribute more than $1 trillion in additional wealth to US workers, with impact expected in over 90% of US households.”

And the cost? Zero. A well-designed loan guarantee program pays for itself. No wonder the authors believe that such a program could make a big difference—and garner considerable bipartisan support.