Building Your Business with a little Help from your Gov.

Laid-off workers who want to launch a business may be able to get a cash infusion from an unexpected source: their unemployment checks.

Usually, unemployed people face a tough choice when it comes to entrepreneurship.  If they start a business, they lose their benefits—right when they desperately need cash to fund their new enterprise as well as cover their household bills.

But a handful of states offer a way out of the bind.  Under the Self-Employment Assistance (SEA) program, qualified candidates can keep collecting unemployment checks while they build their business, and they often get state-sponsored training and counseling along the way.   SEA isn't a new idea; it was authorized by Congress in 1993.  Currently, though, just Oregon, Washington, Delaware, Maine, New Jersey and New York offer the program.

Why isn't it more widespread?  One big factor is politics.  Patrick Sanderlin, who oversees the SEA program for Oregon, says he has received inquiries about it from other states.  But states that want to implement the program must get a bill through their legislature, and the idea of potential political battles damps their enthusiasm, he says.

Also, the state is required by federal law to determine that the claimants would be likely to exhaust their benefits without finding work unless they started a business.  Some states such as New Jersey sponsor the training at community colleges.  Other states, such as New York, Washington and Maine, require training but the SEA enrollee must pay for the courses.  Meanwhile, states often review claimants' business plans for feasibility, and once the companies are up and running they often must meet goals along the way, such as developing a marketing plan.

In some cases, applicants must also show that they have the resources to get a business off the ground.  "Money is the biggest problem for start-ups, and applicants to the SEA program who don't have finances lined up are usually not accepted into the program," says Michael Glass, director of statewide training at Mercer County Community College in West Windsor, N.J., and coordinator of training for the state's SEA participants.

Every bit helps—and in some cases it's the difference entrepreneurs need to get going.  For many entrepreneurs, the Self-Employment Assistance program offers a crucial benefit besides money: education.

Many states require participants to take training courses to help them get their business off the ground.  New Jersey, for instance, provides 60 hours of courses for four to six weeks at community colleges, as well as one-on-one counseling.  Even if states don't require training, they often offer counseling to participants, as Oregon does.   Many entrepreneurs say that the training gave them insights and skills that helped them launch their venture.

Source: The Wall Street Journal, February 14, 2011