If you want to know how something works, author Samuel R. Delany once said, look at one that’s broken. Independent contractors and small businesses, then, have learned an awful lot about federal aid thanks to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). At least 15% of Americans are unemployed—the worst since the Great Depression—and if small businesses don’t soon get help, they will only add to that number. The CARES Act has done a halting job at best on delivering the small business aid it promised.

With no sign of a recovery in sight, and as the U.S. government takes an ostrich approach to the pandemic, small businesspeople who haven’t before examined their options will soon attempt the gauntlet that is federal relief. The big questions they will have are what funding is still there, and how might it be accessed. Those answers seem to change by the day. Here are the big ones.

Economic Injury Disaster Loan

The two most frequently cited programs for federal relief are the Economic Injury Disaster Loan (EIDL), and the Paycheck Protection Program (PPP), both designed to help independent workers and small businesses. The EIDL is just what it sounds like. When some devastating economic situation occurs, the Small Business Administration will help you with an emergency loan. You are eligible to borrow up to $2 million at an interest rate of less than 4% over 30 years. Loans over $25,000 might require collateral.

There is a supplement to that, called the Emergency EIDL grant, which forgives the first $10,000 of your loan. In other words, it doesn’t need to be repaid. The CARES Act promised that the SBA would provide these loans to freelancers, contractors, and small businesses who were affected by the COVID-19 economy. The law promised it would do so within 72 hours of application.

In practice, for single member businesses, the desperately needed $10,000 turned into a paltry $1,000—when it materialized at all. Some got it. Some didn’t. There seems to be no rhyme or reason as to whom or when or why or how. Moreover, the program is perpetually broke, and right now, the Small Business Association is only accepting EIDL applications for agricultural businesses. (Stay tuned for any future stimulus packages by Congress.) So what happened?

“Part of the challenge with the SBA EIDL program is that the government never anticipated the volume,” Tom Sullivan, the vice president of small business policy at the U.S. Chamber of Commerce, tells ClearanceJobs. “When Congress said: within three days of your application you’ll get a $10,000 grant, no one realized that there would be millions of applications hitting the SBA online system. And unfortunately, I think SBA was overwhelmed, and no one there stood up and said, ‘I’m terribly sorry, but we can’t do it.’”

Paycheck Protection Program

The Paycheck Protection Program, meanwhile, provides 100% federally guaranteed loans to small businesses, including sole proprietorships and independent contractors. Recipients are eligible for loan forgiveness if they use 75% of the funds for payroll and employee benefits. (Note that you are disallowed from using both the EIDL and the PPP to cover payroll.) The PPP allows independent contractors and small businesses to borrow 2.5x their average monthly payroll cost for an eight-week period. You go through the bank to get this loan.

The interest rate on the loan is 1%, there is a six month deferment on paying it, and it is due in two years. As to the forgiveness, you are definitely going to want to talk to your accountant about it; forgiveness isn’t automatic: you have to apply for it. The U.S. Chamber of Commerce has a useful document that breaks down eligibility and forgiveness, and allows you to do the math yourself.


Neither program has gone off without a hitch. Both have been beset with egregious delays and seem terminally underfunded. Accordingly, many small businesses and independent contractors who needed them, and fast, have fallen into in dire straits.

“Part of the challenge has been that we combined the discussion of EIDL with the discussion of PPP loans, which was a very dangerous way to characterize two very, very different programs,” says Sullivan. “The EIDL loans—the SBA disaster loans—they were never intended to provide quick liquidity.” Rather, he said, the EIDL loans typically range from four to eight weeks of processing time, and have always been designed to help communities rebuild after a disaster like a hurricane or a flood or tornado. The small business community, he says, would have been a little bit better off with the expectation at the front end that these are not quick loans.

PPP loans, on the other hand, were intended for quick liquidity, and have had some mixed success. “I think now that we see the average loan size going down to $75,000,” he says, “it’s obvious that more and more self-employed and independent contractors are accessing those PPP loans. That’s encouraging. It’s moving in the right direction.”

Employee Retention Credit

Another relief program put in place by the CARES Act is the employee retention credit. It is administered by the IRS, and the basic idea is to encourage employers keep their people on the payroll. Yes, self-employed/contractor/1099 workers are eligible. Note that this one cannot be combined with the PPP; you can get one or the other.

“We’ve seen slightly larger small businesses take advantage of the employer retention tax credit for a few different reasons,” says Sullivan. “In order to get a tax credit, you’ve got to look a bit longer term to realize the tax savings, whereas PPP is intended to give an immediate influx of cash.” He says that, generally, businesses who have a few more employees and higher cash reserves are looking at the employee retention tax credit over the PPP.

The way the credit works, in short (talk to your accountant), is that you apply for up to $5,000 per employee per month in tax credits for wages if your business has plummeted more than 50% because of COVID-19. This one is a particularly good deal for businesses with more than 500 employees.

With any of these programs, says Sullivan, there is always a risk. “It’s good for small businesses to keep in mind that there’s no such thing as free money,” he says. “Small businesses need and deserve help from the federal government, but make no mistake about it: this is taxpayer money. And in order for you to receive it, whether it’s a guaranteed loan or a disaster grant, there is a requisite understanding that you’re opening up your books, to a certain extent, to the taxpayers. If you are accepting government taxpayer money, then you’ve got to be willing to have a certain amount of transparency about your business.”


There is no one right relief program for your business. “There are 30 million small businesses in this country. Eighty percent of them have no employees. None of them are the same, so there’s no easy answer like ‘take an EIDL before you take a PPP,’ or ‘take advantage of the employee retention tax credit and don’t take a PPP’—every situation is a little bit different,” says Sullivan. He cautions businesses to avoid taking on too much additional debt if possible; to be wary of deals that look too good to be true (they might be scams); and to reach out to business mentors. Indeed, he says, it is the small business mentors who are going to get us through this.

“I’ve never met a small businessperson who didn’t have a mentor,” he says. “Sometimes it’s their accountant. Sometimes it’s a lawyer. Sometimes it’s a coach—and I don’t mean like a business coach. Quite literally, a coach. Sometimes it’s the auto mechanic down the street. Every small business is part of a community. The first thing I would tell a small businessperson going through this is to seek out and listen to that mentor, to that community.”

Everyone, he says, wants to help, and particularly in a time of a crisis. “I’ve seen those communities come together now more than ever before.”

The U.S. Chamber of Commerce has also ramped up its public education initiatives. The organization’s core strength has always been advocating pro-business policies before Congress and in the White House, but since COVID-19, they have shifted quickly from a lobbyist advocacy role to an information role. “We heard from thousands of small businesses who told us that funding is the most important issue they face,” says Sullivan. “Loans were second. But a close third was guidance and education on how to access federal resources that can help. We took that and we ran with it, and we produced our small business digital presence at growwithco.com. We have been pushing out as much content as humanly and computerly possible.”

Of particular interest to ClearanceJobs entrepreneurs is a webinar hosted by the U.S. Chamber of Commerce featuring the administrator of the General Services Administration, Emily Murphy, and a panel of small business owners. On Wednesday, May 13th from 4:00-5:00 PM EST, they will discuss small business federal contracting in the COVID-19 pandemic. The event is open to the public and will describe how the federal procurement world has changed to help small businesses sell to the federal government. RSVP here to learn more.


Rafael Espinal, the president of the Freelancers Union, the largest independent workers organization in the United States, representing the 56.7 million independent contractors, freelancers, and contingent employees, advises all eligible 1099 workers to apply for unemployment. “The loans that exist only cover certain time periods,” he says, “and we don’t know how long it’s going to take for things to restart. As long as you are in the system for unemployment insurance, it will guarantee that once the loans dry up that you might have received, you can start certifying that you don’t have any other source of income, and start receiving unemployment.”

The backlog on systems, he says, is tremendous, so expect to wait days—if not weeks—to hear a response from your city or state unemployment agency. Be aware also that many state unemployment websites were not designed for independent contractors and freelancers, and filling out those online forms can be like trying to hammer a square peg into a round hole. He notes that the questions on unemployment websites can be very confusing.

“There is a question that asks if your place of employment has shut down because of COVID,” says Espinal. “As a freelancer, I think it is fair to say that you don’t have a place of employment, and people get confused and they answer that question by saying no. But that can trigger an application to be denied, signaling to the state that there’s an opportunity to work. I’ve heard from independent workers who answered that question as no and that confusion has led to them not receiving benefits.”


Though it is cold comfort to those who need help now, if nothing else, the shortcomings of the small business relief programs during COVID-19 will help the government do a better job in the future. “We are starting to be able to get some hindsight,” says Sullivan. “We are able to look at what’s next and focus not only on things that can help people right now, but also examine what’s got to be done to make federal assistance work smoother for small businesses in the future.”

He compares the needed direction of such programs to ecommerce sites. “If you do business with an online platform, ranging from a local clothing store to global behemoths like Amazon, you’re able to check on the status of your order.” It’s not always great news, of course. Sometimes you order a bathing suit for July, but you learn that it won’t arrive until November, when you can no longer swim. But at least you know.

“There’s a benefit in that transparency,” he says, “a benefit in providing some certainty of a transaction. And that is something that is missing, obviously, from SBA the disaster loan program.” He explains that in the years ahead, the SBA has to operate much more in the way that businesses operate.

“I’m certainly hoping that SBA Disaster Assistance 2.0 follows the lead of what the private sector has done for several years,” he says

Unless federal relief programs are improved, of course, and soon, the private sector might look very different by then.

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David Brown is a regular contributor to ClearanceJobs. His most recent book, THE MISSION (Custom House, 2021), is now available in bookstores everywhere in hardcover and paperback. He can be found online at https://www.dwb.io.