Karen Kerrigan, CEO of the Small Business & Entrepreneurship Council, says counting contractor costs will make a big difference for small businesses.

Federal aid for small businesses got off to a halting start this week as major lenders including Chase and Wells Fargo failed to launch applications on Friday, the announced beginning of the biggest program, and Treasury issued guidance late Thursday clarifying that the money small businesses spend on contractors should not be included in payroll costs.

The confusion comes amid the largest expansion of workforce benefits in decades, as the $2 trillion Coronavirus, Aid, Relief and Economic Security (CARES) Act expands the safety net for small business owners, and offers access to financial relief for freelancers and contractors unheard of in the past.

But the Act was a promise. The early days of the programs have yet to deliver. As of Friday, large banks had yet to launch application portals for the $349 billion Paycheck Protection Program, though some community lenders were taking paper applications, sources said.

Meanwhile, the disaster aid advances of $10,000 that the SBA had said would arrive as soon as three days after applications had failed to arrive on Friday after the application launched on Tuesday. A source within the SBA said the problem was between the connection between the SBA and U.S. Treasury, which is disbursing funds.

Across the country, anticipating delays with federal aid, many communities have already launched their own funds.

The relief package makes freelancers and contractors/sole proprietors – people who work steadily for companies but aren’t technically employees — eligible for the relief checks that will go to millions of Americans who meet certain income limits. Small business owners, freelancers and contractors can also file for unemployment insurance, federal Economic Injury Disaster Loans (which include a $10,000 advance that does not have to be paid back) and, potentially, for the Paycheck Protection Program, a lending program that offers forgivable loans to small businesses that keep workers on payroll for eight weeks. Some small businesses had been hoping the amount they paid to contract workers could be included in payroll costs. That could have been significant for businesses such as ad agencies, public relations firms and some kinds of tech firms that outsource much of their work to regular contractors.

On the whole, though most experts saw the package as an advance for independent workers and small business owners.

“I think that legislators and the public are finally waking up the value of the 41 million Americans who work independently each year, and the $1.28 trillion in economic impact these workers have,” said Gene Zaino, chairman of MBO Partners, a provider of back-office services to independent workers. “There is a real need for these people to continue contributing to the economy, and this is taking precedent over the technical issues of who is an employee vs. who is an independent contractor.”

MBO Partners has just published “The CARES Act: What It Means for Self-Employed, Freelance and Independent Workers,” a report offering detailed information.

Here is a look at how benefits will play out.

Relief checks 

Americans who make less than $75,000, based on their most recent tax filing, will get a one-time cash payment of $1,200, with married couples each receiving a check and families receiving $500 per child. The payments are scaled back for individuals who make more than $75,000 and couples who bring in more than  $150,000. If you make more than $99,000 as an individual or more than $198,000 as a couple, you are not eligible. 

Unemployment insurance 

Small business owners, if they had themselves on payroll, are eligible for unemployment are under the CARES Act. Small businesses are defined as those with fewer than 500 employees. Meanwhile, The access to unemployment freelancers and contractors will get under the CARES Act is a “major government breakthrough,” according to Steve King, partner at Emergent Research, a research firm in Lafayette, Calif., that studies the freelance economy. 

States will pay the benefits, which average about $385 a week for the nation, according to Emergent Research, with most states covering 26 weeks. The cares act will provide an additional $600 a week for four months, under a part of the act called the Pandemic Assistance Program. Small businesses that have lost all or part of their business may be eligible. 

To apply, visit your state’s website. Here is a list of the state sites. 

Economic Injury Disaster Loan

This program for all small businesses, sole proprietorships and freelancers, offers loans up to $200,000, including a $10,000 advance, to be paid within three days of the application, that does not have to be paid back if it is applied to operating expenses specified in the program.

The U.S. Small Business Administration has started taking applications through a streamlined disaster loan vetting process. You can apply through this link.

The Paycheck Protection Program

The Paycheck Protection Program offers small businesses loans equal to 2.5x their payroll costs over an eight-week period, plus 25% for non-payroll costs. The loans can be used to cover payroll, benefits such as health insurance, rent and utilities. Though there is a lack of clarity on whether any of the money can be used to pay contractors or freelancers, Zaino say the latest Treasury guidance is that businesses can use as much as 25% of the aid for non-payroll costs, like contractors.

U.S. lending institutions will start accepting applications on April 3 from small busineses and sole proprietorships and on April 10 from the self-employed and independent contractors. 

Can a business count any independent contractors it pays in its payroll costs? That remains to be seen. The Small Business and Entrepreneurship Council and Small Business Roundtable have asked for clarity on this in a letter sent to Steven Mnuchin, Secretary of the Treasury, and Jovita Carranza, administrator of the Small Business Administration, on March 31. “It is our understanding that small businesses may include the 1099-MISC payments toward 2019 payroll costs and loan forgiveness,” the letter noted. 

However, it was still unclear as of Wednesday evening. 

“We are hearing that this will not be allowed, and forthcoming guidance (we heard) will make this crystal clear,” said Karen Kerrigan, president of the SBEC, in an email shared with permission. “Based on the text of the legislation we did believe that payments made to independent contractors could be included in payroll costs and that this would be forgiven. The newer ‘guidance’ made no mention of this, and based on a call our coalition had with key Administration people it will be spelled out further that PPP funds will not be forgiven if used for this purpose.”

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This story and others on New Builders Dispatch are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit and connect with and