Workers’ cooperatives are difficult to finance. The problems they face include the lack of capital in the hands of those who would be their members, caution in lending by conventional financial institutions, a paucity of appropriate equity instruments for their use, and weak or non-existent markets for those instruments. The debt and equity instruments and markets side of the problem has received little attention, and it is the subject of this paper.

We begin with an overview of the currently accepted “best practice” for the financial structure of a workers’ cooperative. It draws heavily on the early growth dynamics of the Mondragon group of cooperatives in Basque Spain, and on a U.S. adaptation of the Mondragon model. We then turn to an innovative way of lending to workers’ co-ops, problems in long-advocated use of preferred stock by them, and the role Employee Stock Ownership Plans (ESOPs) can play in conversion of traditionally-owned firms to workers co-ops. The paper concludes by surveying roles for foundations and federal legislation in promoting development of workers’ cooperatives.