Self-Employed Get Raw Deal in U.S. Multitrillion-Dollar Rescues

The frustrations are piling up for Dara Padwo-Audick, who runs a video production firm in Virginia: She never heard a word on her loan application under the government’s Paycheck Protection Program, she’s been blocked from collecting unemployment insurance, and even had a glitch with the Internal Revenue Service over her stimulus check.

“Other companies are getting large sums,” said Padwo-Audick, frustrated at the lack of relief for independent contractors like her. “I kind of question how is this being allocated and who’s doing this allocation.”

Millions of people are in the same boat as they await a new round of small business aid that could be approved by Congress as early as this week.

Nationwide, small businesses — and some not so small — snapped up $349 billion during the program’s first phase earlier this month. Yet sole proprietors and contractors who account for around 80% of the 30 million U.S. small businesses largely got shut out of the program, advocacy groups say.

The remaining 5 million or so companies with payrolls appear to have won the lion’s share of PPP loans, as well as certainlarge restaurant companies that tapped the program, such asRuth’s Hospitality Group.

Congress is expected to replenish PPP with another $320 billion, including $30 billion set aside for the smallest lenders and community development financial institutions, which serve low-income groups. While that carve-out may help some sole proprietors and contractors, their advocates are bracing for another weak showing.

The number of sole proprietors winning SBA loans “will be so dismally small that, hopefully it would prompt people to think about ways to assemble the toolbox for the next time,” said Katie Vlietstra of the National Association for the Self-Employed.

The smallest of businesses lack clout with banks, and they would be better served by getting a direct check from the IRS or a cut in interest rates from their credit card companies, Vlietstra said.

Moreover, she said, some advocates haven’t had as much face time with leaders in Washington as they wanted and have tempered their expectations:“No one’s really talking to us.”

The self-employed had an uphill climb getting funding under the first round because they could only start applying on April 10, where other small businesses could begin a week earlier. Making matters worse, theSmall Business Administration and U.S. Treasury didn’t provide guidance on how self-employed business people should calculate their maximum loan amount or what documentation they should provide until April 14 — two days before the money ran out.

No Evidence

A Treasury Department spokesman said the self-employed and contractors got tens of billions of dollars in loans, without giving details. A recent SBA breakdown of PPP loans showed the size of banks making the loans and which industries got them — but provided no information on the size of the borrowers.

However, small business advocates haven’t seen evidence of the billions. Vlietstra hadn’t heard of any NASE member getting one of the loans. A recentNational Federation of Independent Business survey drew 60 responses from sole proprietors, only one which got a loan, said Holly Wade, NFIB’s research and policy analysis director.

In its latest rescue package, Congress didn’t carve out money specifically for the self-employed and contractors, one of the requests made by the Freelancers Union, a national group representing contractors.

“You are seeing the 20 million who filed for unemployment. I’m going to guess a big portion are the self-employed who had to wrap up their business,” Vlietstra said.

Hela Sheth, who runs a one-person public relations firm in the Atlanta area, has watched some of her clients pull their business amid the pandemic. She gave up on a PPP loan after after the bank said her initial application had to be refiled and by that time, the money had nearly run out.

”It was super frustrating,” Sheth said. “I feel like I wasted lots of hours when I could have spent time with my family or working on my existing clients or trying to find new clients.”

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— With assistance by Saijel Kishan

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