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Laid Off and Want to Start a Business? Self-Employment Assistance Programs May Help

Laid Off and Want to Start a Business? Self-Employment Assistance Programs May Help

By Caron_Beesley, Contributor
Published: October 3, 2012 Updated: September 20, 2016

Despite signs of economic recovery, countless Americans are still dealing with layoffs and unemployment. As often happens when the economy slows, many Americans respond by using unemployment as a springboard to business ownership.

But unemployed workers face a fundamental challenge when it comes to starting a business – how do you start a business if you risk losing your unemployment benefits simply because you aren’t actively looking for a career-job?

In an effort to address this issue, the Middle Class Tax Relief and Job Act signed into law by the President in February 2012, made available $35 million to encourage states to enhance and promote Self-Employment Assistance (SEA) programs. SEA entitles unemployed individuals to claim jobless benefits while getting access to small business development assistance.

What is Self-Employment Assistance?

According to The White House Blog (May 24, 2012) the idea of SEA is simple:

Some laid-off workers have the skills, experience, and entrepreneurial ambition to launch a successful business, but they are locked into an inflexible system.  If they stop looking for traditional work full-time, they will lose their unemployment benefits. Instead, SEA allows an entrepreneur with a viable business plan to receive those same unemployment benefits, as long as they are working full-time to get a new company off the ground.”

SEA isn’t a new concept. Five states – Delaware, Maine, New Jersey, New York, and Oregon – already have SEA programs in place.

How Self-Employment Assistance Works

Under this program unemployed entrepreneurs get financial aid equal to their Unemployment Insurance benefits for a maximum of 26 weeks, while they receive entrepreneurial training and other resources to help them launch a business. SEA benefits (taken from Oregon’s SEA program as an example), include:

  • Weekly unemployment benefits while engaging in self-employment activities
  • Waiver of the actively seeking work requirement while participating in the program
  • Counseling and technical assistance on developing a market feasibility study and a business plan

The Department of Labor is driving efforts to help states become aware of the funding available to help them implement SEA programs, and has issued guidelines on how states can deploy this provision. Through its local offices, the SBA as well as SCORE and Small Business Development Centers across the country are also getting involved to connect entrepreneurs with the business development and mentoring services that they provide.

Does Self-Employment Assistance Help Spur Business Creation?

According to the White House, this model works. In multiple studies, SEA has been shown to increase the success of entrepreneurs and their earnings from self-employment. The White House cites several examples of SEA at work, including:

Adam Lowry and Michael Richardson, two software developers in Portland, Oregon whose employer went out of business in 2009.  Self-employment assistance allowed them to pursue their entrepreneurial ambitions and launch Urban Airship, an innovative mobile advertising company that now employs 75 workers, and promises to keep on growing.”

Who is Eligible for SEA support?

If your state has an existing SEA program, you have to meet several requirements to qualify for the program, including but not limited to the following:

  • You must be eligible for and be receiving unemployment benefits.
  • You are unlikely to return to your previous employment.
  • You must have a viable business idea, be willing to work full time in developing your business, and have the finances you need to start and sustain your business until it becomes self-supporting.

Entrepreneurs can take advantage of business development via seminars at community colleges, educational institutions or individual counseling sessions at a Small Business Development Center. You may also be required to complete a market feasibility study and write a business plan.

How to Apply for SEA

If you live in a state with an existing SEA program, check your state’s website for more specifics on how to apply. All U.S. states have until June 30, 2013, to apply for grant funds to implement SEA programs. Contact your local SBA office or state employment or labor office for more information about what your state is doing to establish a program.

Related Resources

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley