How Congress can serve our smallest independent businesses

When Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the bill was heralded as historic, and — in many ways — it was. For the first time, it extended unemployment protections to microbusiness owners, independent contractors, and the self-employed. It similarly opened Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans to these individuals.

Still, just over three weeks later, it’s become clear: These programs aren’t adequately serving the smallest of small businesses. Millions of freelancers and contractors, including Etsy sellers I’ve spoken to like Joelle Workman and Justin Arawjo, are struggling to access the benefits the CARES Act promised.

For nearly 10 years, Joelle and Justin have successfully grown their business, Fennec Design, which sells handcrafted apparel, home goods, and jewelry. When this crisis hit, they had to close their retail shop. Even with online sales, their future feels uncertain. So, they applied for a PPP loan through their bank, but the process — as they described it — was a nightmare. They spent six hours trying to apply — but documents wouldn’t upload, forms wouldn’t save, and e-signature functions wouldn’t work. When they were finally able to submit the application, they got an email stating that documents and signatures that they provided were missing. Now, the PPP funds have run out.

There’s a reason the benefits included in the CARES Act haven’t benefited Joelle and Justin. As they put it, “Lumping our two-person business in with a 500-person business with millions in sales and payroll is just absurd.” Historically, federal and state programs were designed to serve the businesses of 500 or 50, not businesses of two or one. Repurposing these programs to serve the latter comes with complications, as we’ve seen in the past weeks.

Independent contractors and self-employed individuals were not permitted to apply for PPP loans until April 10, a full week after small businesses. By that date, more than 550,000 loans totaling $141 billion had already been approved with many more waiting for approval. Just six days later, the Small Business Administration announced that the funds were completely depleted, leaving many in the lurch.

Even before that announcement, microbusiness owners faced obstacles. Many banks only offered PPP loans to those with whom they have existing business relationships, which automatically disqualified many independent contractors. And from the definition of payroll costs to limitations on the portion of those loans that may be forgiven, the PPP loan program itself puts the self-employed at a disadvantage.

Our nation’s smallest business owners have been contending with these issues while facing challenges from decreased demand for their products, radio silence from state unemployment offices, and now, the potential shutdown of the U.S. Postal Service, a service the vast majority of U.S. Etsy sellers rely on to reach their customers. Bureaucratic blow on top of bureaucratic blow.

This is no small problem. More than a third of employable workers in the United States are independent workers. And at close to $1 trillion, the income generated by independent work in the U.S. makes up nearly five percent of our national gross domestic product (GDP). Put simply, what happens to people like Joelle and Justin matters to our economy. The CARES Act was meant to provide relief to all kinds of American workers; the strength of its implementation must meet the ingenuity of its intent.

Many have called on Congress to end its stalemate and expand PPP and EIDL funds, which it should without delay. But our leaders can’t stop there. These programs need to be set up to serve the 57 million independent workers in this country. That means dedicating a portion of funding within these programs for the self-employed and independent workers, with key provisions, like allowing them to take the full $10,000 EIDL emergency grant or making both payroll and non-payroll costs for the self-employed eligible for forgiveness within the PPP program, up to a certain amount.

Federal agencies should also provide clear guidance for the self-employed and independent contractors to access SBA loan programs and Pandemic Unemployment Assistance, including accepting flexible income documentation from those applying for aid; explicitly including those who have experienced meaningful declines in income; and no longer requiring individuals to first apply for — and be denied — traditional unemployment insurance in order to qualify for benefits.

We need a system that works for everyone who works, including microbusiness owners, independent contractors, and the self-employed. After all, the nation is relying on businesses, from very big to very small, in its response to COVID-19. Hotel chains are providing rooms to healthcare workers, and distilleries have swapped hops for hand sanitizer. At Etsy, 30,000 of our sellers have repurposed their businesses and started sewing face masks.

I’m proud of these business owners. But cutting fabric for face masks in response to this crisis shouldn’t be easier than cutting through red tape to access crucial relief. Right now, for many independent workers it is. Our leaders can, and should, change that.

Josh Silverman is CEO of Etsy, a global, online marketplace for creative goods from an array of independent sellers.