(Damian Dovarganes/AP)

The U.S. Department of Labor issued guidelines Thursday for state workforce agencies to create programs that would allow their states’ unemployed to collect unemployment insurance while starting their own businesses. The so-called Self-Employment Assistance programs will be funded by a $35 million grant, divided among all 50 states and D.C., and disbursed to individuals who qualify for unemployment compensation but wish to start their own companies rather than find a new job.

The programs would require interested entrepreneurs to bring their business plans to their local state-based programs for evaluation. If approved, they would receive up to 26 weeks of financial assistance equal to the amount they would have received in unemployment insurance, as well as entrepreneurship training, while they attempted to get the business running.

“You have young people with real talent who have been denied opportunities or laid off through no fault of their own,” Sen. Ron Wyden (D-Ore.), a proponent of the law, said in the interview. “Why not unleash those entrepreneurial skills rather than be pushed into the cookie-cutter of looking for work?”

This differs from the typical unemployment insurance process in that UI recipients are usually required to search for full-time jobs and accept any offer in order to remain eligible for unemployment checks. Beneficiaries of the new self-employment assistance programs would not be subject to the typical job-search requirements.

If the beneficiary’s business flops after the 26 weeks run out, they’ll still be eligible for the standard unemployment program, Wyden said.

Five states — Delaware, Maine, New Jersey, New York and Oregon — already have active Self-Employment Assistance programs. Other states have until June 30, 2013 to submit applications to the Labor Department. Grant money can be used by states to implement a new Self-Employment Assistance program, improve a current program, or to enroll eligible participants. States’ participation in the program is voluntary, but Wyden said he hopes the new Labor Department guidelines will encourage more states to come on board.

“Any state that wants to take advantage of a program that we think is helping to reinvent the safety net can do so,” he said. “I see this as a springboard for those for whom the current system doesn’t serve their needs or the country’s.”

The program is part of the Middle Class Tax Relief and Job Creation Act of 2012, which was signed by President Obama in February.