8a Applications & SBA 8a Certification Process

Many small businesses take the chance on their own only to spend twice as much processing time for SBA 8a certification application approval that often ultimately prove unsuccessful in certification, even when meeting generic requirements.

For you to be an expert in the approval process you would simply have to know the laws and rules. This is virtually impossible.

The public is usually not told of the detailed requirements for certification. Up-to-date knowledge of SBA approval and denial cases and a legal understanding of these requirements beyond the surface based requirements is critical to resolving issues in your application and pinpointing areas that require further explanation or redrafting.

From Start to Finish: the 8a Certification Processing Time

Phase 1:  Comprehensive Gathering of All Documents

           Gather All Documents:  This phase is critical to ensure your application is not rejected based on failing to meet the basic criteria of submitting all required materials – in which case, SBA will refuse to even evaluate your application.  As well, documents must be within the same time frame.  For example, a company’s meeting minutes must be up-to-date concurrently with financials submitted, such as profit and loss statements.

           Clients may accomplish Phase 1 as efficiently as 1-2 weeks or as slow as 2-3 months, maybe longer. The SBA processing time for this Phase is entirely dependent on you as a Client/Applicant and the efficiency and knowledge in which your counsel helps you to quickly pinpoint what is incomplete or missing and identify and resolve issues.  Our proven track record demonstrates our 8(a) representation is highly valuable to Clients’ success and commonly reduces time spent preparing an application correctly.  

We recommend you complete Phase 1 as efficiently as possible and with professional oversight to avoid requirements set forth in cases where SBA has rejected applications.  The longer this Phase takes an Applicant, the increased likelihood of running into problems with changes in the process or regulatory requirements and new case law that may require you to go back and prepare, gather, or modify existing documents/information.

Some of the more recent changes in the submission 8a certification application process and regulations include the following: 

• On August 24, 2016, the U.S. Small Business Administration (SBA)’s 8(a) Business Development (BD) Program updated 13 CFR 124. These changes included the requirement that all 8(a) applications along with your supporting documentation must now be filed electronically.  See https://Certify.sba.gov/8a-docs. As a result, information previously contained on Forms, such as the financial Form 413, is still required but no longer submitted on Forms and such information should be no older than 30 days.
• Transfers of ownership are more heavily reviewed and must be legally sound and structured correctly.  SBA has taken an expansive view of the legal requirements here, which often involves documents well beyond the Transfer Agreement itself.
• Economic disadvantage narratives are no longer required.
• If there are any outstanding liens/judgments [on what?], they should be resolved before the application is submitted.

Phase 2: Drafting of Missing Documents or Required Explanations and Editing of Existing Documents to Meet the Requirements

Once you have comprehensively gathered all documents in Phase 1, this Phase is similarly based on the knowledge and efficiency of the Applicant/Client and counsel.

We will work with you to identify documents that may need redrafted because of red flags and areas of your application that lack legal specifics, for example, missing elements of a narrative that do not meet the preponderance of the evidence standard or details required in your Operating Agreement or Bylaws to avoid common mistakes regarding control and voting.  As well, it is not uncommon that new documents or explanations will be required to achieve certification (one such example is mentioned above in reference to transfers). 

Phase 3:  Post-Submission

The next phase is simply a waiting game.  Applicants must wait for the SBA to respond.  The SBA technically has a 90-day requirement to respond to applications.  But, there are many occasions where this still doesn’t happen.  This can be a result of backlogs, issues within departments/changeover of personnel, government shutdowns or any number of reasons.  The best way you can reduce this time frame is by discussing with your Attorney the periods of time with reduced application submissions and simply submitting the most thorough application possible.

NOTE: a response does not mean approval or denial, but is simply a response, which frequently consists of further questions and inquiries regarding existing documents/requirements.  You should expect this.

           Once again, the ball is in the applicant/Client’s court to respond quickly and comprehensively to these requests/questions.  It is again best and most efficient to use counsel to do so.

Overall:  There are significant variables that impact the length of time in the SBA process.  However, it is unreasonable to expect the complete process of the above phases will be shorter than 3-4 months and usually should not take longer than a year.  Remember, there are several periods of time that are within your control, including gathering documents and responding to SBA requests.  Quickly gathering documents, meeting detailed requirements that increase SBA’s ability to process applications, and responding inefficiently and with legal accuracy to SBA’s follow-up response can significantly impact the time required.

          Now that you have a better sense of the SBA process and timeline, what else should you know? How Do You Demonstrate the Ability to Succeed in the 8a Program?

This is yet another frequent hurdle that most applicants find in the SBA 8a Certification Application Process. Being broke is not the way you want to go during the certification process.

• Instead, you want to show the SBA that you have more than one existing client (too much revenue from one client can cause problems).
• You also want to show a profit during the past three years. If not, you want to explain the ups and downs.
• It is advisable to seek lines of credit to better position yourself.
• Adequate finances and existing business are two main factors for you to consider in the SBA 8a Certification Process.

Does Buying an Existing Business Affect My 8a Certification Application?

Generally not. You must be able to provide the pertinent purchase documents in your certification application package, show that shares are transferred and that the buyer is totally in control of the business.

• You must ensure that the new owner shows the requisite managerial experience (resume and or certifications) to take over and run the business.
• If you are relying on a minority transfer only to get you through the application process, you will more than likely be denied.

Survival After Approval

After you have survived the SBA 8a certification process, you are mandated to abide by strict rules. See 13 CFR 124.

• You must submit annual reviews and financials;
• You must show efforts to acquire non 8a work;
• You must also show that you dedicate full-time efforts to the business, and
• You must provide information or changes to your original 8a application.
• Failure to respond to the SBA and/or inadvertent mistakes can cost you a termination from the 8a program.

If you are seeking expert advice on 8a application or the SBA 8a certification process, contact Watson & Associates LLC for a free initial consultation. Call Toll Free 1-866-601-5518 or simply call our SBA 8a application consultants.