By understanding the government’s concerns when trying to meet the SBA 8a Certification Requirements and Rules, you will be better able to provide the important documents and requirements in your 8a application to get approved the first time around.
The benefit of going through the sometimes confusing SBA certification process can be worth it. Once you become an 8a certified company, you have access to millions of dollars in government 8a contracts that you would never have had before. Furthermore, companies that are not small business 8a certified cannot touch the contracts that are set aside for the 8a Business Development Program.
- If you don’t get it right at the initial stages, you will lose credibility more with the SBA when you submit your reconsideration request
- There is significantly more in-depth analysis and critique by the SBA after you submit your 8a application?
- Getting access to millions of dollars for a federal government contract means knowing how the game is played.
- When it comes to knowing how to start an 8a company, getting professional help is not a must but it saves you a large headache.
- Be advised that if you submit false information to the government or intentionally do not follow the rules after becoming 8(a) certified, you and your company could face criminal charges and fines (see below).
Government SBA Certification Application Qualifications – What are the SBA 8a Program Requirements?
To become 8a certified, the company in its SBA 8a certification application must meet the business development certification requirements below.
- In your SBA 8a application development, you must be a small business concern based on applicable size standards for small businesses in your industry.
- All individuals upon whom 8 a program eligibility requirements are based must be U.S. citizens.
- You must be the unconditional majority business owner.
- Outside business interests are strictly limited.
- You must work full-time in your business.
- You must be in immediate control and in charge of your business.
- You must possess good character and demonstrate the potential for success in the 8a Program
- Board control in the case of a small business corporation can be exercised only by disadvantaged persons.
Be mindful that the SBA scrutinizes your application for inconsistencies, violations of tricky rules and submission of false information.
To get your government 8a status and take advantage of federal contracts opportunities, SBA 8a program requires that you must be a socially disadvantaged individual. Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities.
- Note that the new SBA 8a Contractor Program rules only require narratives in certain situations
- As an 8(a) applicant, you must still meet the legal standards in case someone challenges your status
Other SBA 8a Business Development Program Requirements and 8a Program Qualifications
SBA 8(a)certification qualification requirements mandate that an 8a company must be owned, controlled, and operated by people who are socially or economically disadvantaged. This could be one or more persons who are owners and meet the SBA evaluation standards.
Other individuals can be admitted to the 8 a Business Development Program if they can show evidence that they are disadvantaged because of race, ethnicity, gender, physical handicap, or residence in an environment isolated from the mainstream of American society.
- Ultimate control of your company must not reside with anyone other than those upon whom 8(a) certification eligibility is based.
- You must be an economically disadvantaged person. For the 8(a) program this means all applicant individuals must have a net worth of $250,000 or less, excluding the value of the business and personal residence.
- You must be in business for at least two years or apply for a waiver of the two-year requirement.
- You must not have any significant unresolved federal or state tax financial issues.
- You must be of a good moral character to be approved for government 8a status.
- You must not run a business that is not eligible for SBA certification.
UNDERSTAND THE CONSEQUENCES OF SUBMITTING FALSE INFORMATION (INTENTIONAL OR NOT)AND GETTING INVESTIGATED FOR NOT COMPLYING WITH SBA CERTIFICATION REQUIREMENTS
What is 8a Certification?
8(a) certification essentially means that your company is a participant in the SBA’s 8a Certified Business Program. The Government 8a Program is a nine-year program that allows certain qualified companies to have access to what is considered the fast-track to small business federal contract dollars.
- SBA certification carries tremendous statutory power. The ability to obtain sole-source contracts is paramount.
- The SBA oversees your progress in the program.
- Avoid the common mistake of assuming that it is the SBA’s obligation to find your company government contracts. This is not true.
- Once you become 8(a) certified, you must develop your own business development program and market your company to the federal government.
BETTER INVEST TO REDUCE THE CHANCE OF DENIAL THE FIRST TIME AROUND
It is sometimes better to see where you rank for all of the 8a application requirements ahead of time. If you don’t meet the requirements right away, a good small business 8a certification consultant would develop a plan of action of what you need to and when you can expect to be ready to apply.
BE PREPARED TO SUBMIT BUSINESS INTRUSIVE AND PERSONAL INFORMATION
The SBA 8(a) Business Development Program requirements and eligibility criteria force applicants to divulge a vast amount of personal and business information. However, part of understanding how to become 8a certified means knowing why the 8a program requires a substantial amount of personal and business information.
The reason is that the SBA wants to know whether there are unqualified companies or individuals who are simply taking advantage of the program or a company that gets government 8a status. Knowing how to apply for your 8a business designation and obtain your SBA 8a certification status, you must meet very specific SBA requirements.
Failure to meet any of the business development certification requirements or SBA 8a program qualifications will cause suspicion and rejection from getting your company SBA 8a certified. Besides the general information listed in the SBA regulations, the SBA goes even deeper into your 8a Certification application to look for inconsistencies and evidence of affiliation (a dangerous area where 60% of 8a applicants fail).
To apply for 8(a) certification and increase your chances of getting approved for 8a status, you must convince the area office that you meet the basic SBA 8a certification requirements in addition to meeting the legal standards and level of proof that many applicants do not understand. Failure to do so will cause your 8a application to be denied.
Corporate Issues for Becoming SBA 8a Certified
When considering SBA 8 a program eligibility requirements and SBA evaluation criteria,you must assess whether you are selling services or products that the government buys.
- Corporate documents must conclusively show that the eligible applicant(s) make the final business decisions.
- Make sure that another member of your management staff does not show negative control over your company. This will get you application denied. The reviewer takes a hard look at these SBA 8a eligibility requirements.
- Contracts with third parties that appear to give them control over the company can disqualify you.
SBA 8a Application Requirements – Government 8a Status Net Worth and Financials Program Criteria
Your personal net worth should not be over $250K. SBA 8a certification requirements consider an assessment of all your cash, bonds, stocks, savings and checking accounts, automobiles, etc. If you are not sure, you may want to invest in an accountant to check these financial details.
Although you have to disclose 401-Ks and retirements, they are not considered for personal net worth to get your 8a status.
Areas to watch out for when assessing 8a requirements for SBA certification eligibility evaluation factors. The biggest threat to meeting SBA 8a qualifications when learning how to become SBA 8a certified is when the SBA determines that you do not have the potential to succeed. Unless you can show that the SBA acted in bad faith or clearly abused its discretion, this aspect of SBA section 8a program requirements cannot be appealed.
SBA 8a Contractor Program Eligibility Criteria & Rules
Hidden / Unstated SBA 8(a) Certification Requirements
Did you know that SBA reviews and requires more than the commonly stated requirements found in internet searches? These include the following three requirements.
Articles/Operating Agreement or Articles/Bylaws
The SBA will review company documents extensively, including review of a company’s Articles of Incorporation and Bylaws (for corporations) and Articles of Organization and Operating Agreements (for LLCs) to assess a variety of issues. Some of the questions the SBA evaluates are:
- Does the ownership percentage information of the prospective 8(a) company correspond with the ownership percentages on the SBA 8(a) Form 1010 as well as the stock register/ledger, partnership agreement or operating agreement?
- For LLCs, the SBA assesses whether the Articles of Organization and the Operating Agreement outline management of the firm (e.g., is the firm member-managed or manager-managed)? And whether this corresponds with the management identified in the operating agreement.
- There are other minor issues that can delay or may cause rejection of 8(a) applications, which are commonly missed, including whether the Operating Agreement is signed by all Members.
8a Program Requirements and Government Debts
To meet the requirements for 8a certification it is okay that a company owes taxes. However, the company must be compliant with a repayment plan in place with the IRS. As well, many companies do not know that tax debts are subtracted from the net worth of an applicant (of which there is a maximum net worth allowed for entrance into the SBA 8(a) Program). The reason for this is that net worth is considered a liability and is therefore reported in the liabilities section.
8a small business requirements and Potential Affiliation through Economic Dependence.
Watson & Associates successfully litigated the size appeal Argus & Black. In this case, the Office of Hearing and Appeals (which oversees the SBA decisions in size appeals and in SBA 8(a) decisions), determined that no affiliation existed where a small firm had dependency upon a single, larger firm where a challenged firm has only recently begun operations initially or for a period of dormancy and is dependent upon its alleged affiliate for only one small contract of short duration, particularly where the applicant demonstrates efforts to seek out work with other companies/agencies. This means that under 8a small business requirements newly organize companies and 8(a) companies can avoid affiliation when the company is new, dependent on a large firm for revenues, but makes efforts to gain other work.
COMMON REASONS WHY YOUR 8A CERTIFICATION APPLICATION CAN BE DENIED
- Information that the offered to support claim of social disadvantage in the 8a certification application was vague, conclusory, and lacking in detail, not related to applicant’s personal experiences, or was insufficient to show that (a) alleged incidents of discriminatory conduct adversely affected individual’s entry into, or advancement in, the business world or (b) alleged social disadvantage was both “chronic and substantial” as required by the applicable regulations. See Matter of 7Skyline, LLC, SBA No. BDPE-574 (2019)
- Failure to establish that establish that his disabled veteran status and PTSD, or other condition, resulted in (i) bias against him in employment and business history and (ii) social disadvantage.See Matter of Hruckus, LLC, SBA No. BDPE-572 (2018).
- You did not meet the requirement of showing the potential to successfully meet the business development objectives of the program. This cannot be appealed. See Matter of A.J. Nesti Materials, BDPE-551 (2015)
- Not dedicating enough time to the business
Basic Understanding of the SBA 8 a Business Development Program
The SBA 8a Certified Business Program was initiated to help small businesses like yours to succeed in the commercial and business environment. Companies that are considering joining what some consider the elite of the government contracting small businesses must meet specific requirements to be admitted into the program.
Below is a list of requirements to become 8(a) certified. The most gruesome evaluation by the SBA is to make sure that you, the applicant (s) are actually a small disadvantaged business.
The second, and most deadly, is whether your company is are owned and controlled at least 51% by socially and economically disadvantaged individuals. If you do not pass these first two requirements, then you can certainly expect you 8(a) application to be denied.
Benefits of the Government 8a Business Development Program – Why Get 8a Certified?
Getting your government 8a certification application approved by the SBA means that you essentially are treated as one of the elite categories of federal small business contractors. The heart of the 8(a) Program allows your company to take advantage of small business set-asides; be awarded sole-source contracts (without actually bidding) and to have a ‘fast-track’ to federal contracting dollars.
The reasoning for socially disadvantaged 8a status: The social disadvantage must stem from circumstances beyond their control. Under the Small Business Act, certain presumed groups include African Americans, Native Americans, Hispanic Americans, Asian Pacific Americans, and Subcontinent Asian Americans.
Never make the mistake of thinking that your 8a application will be approved if your company shows unsuccessful performance history. In fact, your 8a application will be denied because you show no likelihood of success. This cannot be appealed.
To get SBA 8a certified, you must show that your business can demonstrate a minimum of $250,000 in gross sales for the previous year. Previous contracting experience with state or federal agencies is preferred. However, having an experienced small business 8a certification application consultant can be helpful in explaining any lack of experience.
Penalties for Violation of SBA Small Business 8(a) Certification Rules
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If you are an economically disadvantaged individual, we can guide you through the process. For help with SBA certification and business development, requirements for 8(a) certification and how to become an SBA 8a certified business and to make sure get your 8a program requirements completed, call our 8a certification consultants at 1-866-601-5518.