Small Business Administration 8(a) Business Development eligibility requirements can be confusing and perplexing. In an attempt to minimize this confusion and help small business owners determine if 8(a) certification is right for them, Government Certification Specialists Inc. (GCS) presents fifteen SBA 8(a) eligibility requirements translated into simple language.
Please note that SBA 8(a) program eligibility requirements change sometimes in response to federal court cases, so always be sure to look up the most recent rules and regulations when you apply for 8(a) certification: http://www.access.gpo.gov/nara/cfr/waisidx_06/13cfr124_06.html
Here are fifteen core eligibility requirements for 8(a) applicants:
1. Social disadvantage. You must be Hispanic American, Asian American, Black American, or Native American OR a person who has experienced persistent and chronic discrimination against you on the basis of disability, gender, veteran status, race, culture, or some other factor. If you are from one of these “non-presumed” groups, then you will have to provide the SBA proof of the discrimination you have faced in American society, education, career, and business.
2. Personal net worth must be under $250K. This personal net worth figure takes into account all of your cash, checking and savings accounts, real estate ( except your personal residence), IRAs, 401Ks, stocks, bonds, automobiles, motorcycles, RVs, and other assets. The value of your company is declared on the personal financial statement (SBA Form 413); however, it is not counted towards the personal net worth cap.
3. Annual Salary: The 8(a) applicant must be the highest paid person in the company. His or her annual salary must be reasonable for the industry and reasonable in proportion to the company’s annual gross revenue. (In other words, if your company earned only $100K in revenue in 2010 and you took $95K of that money for your salary, you are making what the SBA calls “excessive withdrawals” from your company, a potential 8[a] application negative.)
4. Total Current Market Value of All Assets. The current market value / face value of all of the 8(a) applicant’s assets—ignoring the liabilities completely—must be under $4 million.
5. Average 2-year Adjusted Gross Income (AGI): The applicant’s two-year average adjusted gross income (AGI) must be under $200K.
6. Citizenship: The applicant must prove his or her American citizenship with a birth certificate, passport, or other documentation.
7. Business size: The company must be a small business according to current SBA size standards . which are expressed in terms of either gross revenue (dollars) or staff levels (number of employees). Size standards are set by the SBA according to North American Industrial Classification System (NAICS) codes. Determine your company’s primary NAICS code based upon the most recent 12 months of business activity and then look up the corresponding size cap here: http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf
8. Control: A socially and economically disadvantaged person must have full, unfettered control of the company including both strategic decision-making and day-to-day operations. This person must hold the highest, most powerful title in the company also—no exceptions .
9. Ownership: 51% or more of the company must be owned by one or more socially and economically disadvantaged individuals. Also, quoting the SBA directly, “A business can also qualify for the 8(a) BD program if the firm is owned by an Indian tribe, an Alaska Native Corporation (ANC), a Native-Hawaiian Organization (NHO), or a Community Development Corporation (CDC).”
10. Contract Performance: The applicant company must have a substantial contract performance history including one contract completed within the most recent 12 months and a balanced portfolio of clients/projects. Over-reliance on any one client (meaning 70 percent or more of gross revenue stemming from just one client) is viewed by the SBA as a significant problem.
of the Company. Chronological age of the company is not as important as having two recent consecutive federal tax returns proving your company has earned revenue. No tax return? Apply to the 8(a) program later after you have at least one tax return to show SBA (and meet all of the other early admission requirements). No revenue on your company tax returns? Unfortunately your company will not be considered to be economically viable by the SBA at this time. Your company requires a certain level of stability or “potential for success” to gain admittance into the 8(a) program, and this means proof of revenue is required.
12. Full time devotion to the applicant firm: The 8(a) applicant must dedicate himself or herself full time to managing the 8(a) firm (during normal operating hours for the industry) without any outside employment or interference (e.g. full time student status.) Your attention needs to be devoted 40+ hours per week towards ensuring the success of the applicant company within the 8(a) program. Do you own multiple businesses? If yes, the SBA will make you prove that these other companies don’t interfere with your full time management of the applicant firm.
13. Good moral character: Applicants with felony convictions and applicants on parole are not allowed to receive the federal benefit of 8(a) certification. Divulge all past arrests and detainments by police to the SBA, which will in turn validate the information with the FBI. Good moral character is an essential 8(a) program eligibility requirement.
14. No unpaid federal obligations. The applicant firm—and all of its owners, officers, directors, managers, bank signatories, and key employees—must pay all federal obligations including taxes, student loans, etc. before receiving 8(a) certification.
15. Company financial stability. To the SBA, “disadvantaged” does not mean “destitute.” Your company needs to have approximately 3 months’ worth working capital in its accounts or else it needs to have ample credit and loan resources to help it survive. If your company is struggling to keep open, then most likely you are not a good candidate for the 8(a) program until your company stabilizes. The federal government will only admit a company into the 8(a) program if it believes the company has enough stability, viability, and “potential for success” to last all 9 years in the program. The SBA also expects your company to have enough resources and finances to perform large federal contracts and expand in response to increasing federal contracting workloads.
These 15 core SBA 8(a) eligibility requirements are not publicized frequently by the SBA yet are all important factors the SBA will evaluate to determine if your company is worthy of inclusion in the 8(a) Business Development program. If you do not meet all 15 eligibility requirements at this time, you might need six to twelve months to make changes to your company to bring it into compliance with 8(a) rules and regulations.
If you need help with your 8(a) application, you have multiple options available:
2. Seek free help from your closest SCORE (formerly called the Service Corps of Retired Executives) office: http://www.score.org
A.L. Van Mantgem is an account executive at Government Certification Specialists Inc. of Leesburg, Virginia, a veteran-owned company that assists minority owned firms with the 8(a) certification process and with maximizing the benefits of the SBA 8(a) program. Prior to joining Government Certification Specialists Inc. in 2008, Ms. Van Mantgem served as a defense contractor and business development analyst at two different 8(a) companies for a decade and was directly responsible for authoring a successful Congressional appropriations request that resulted in a $1.8 million research and development contract for an 8(a) company. She can be reached via http://www.get8acertified.com .