What is the SBA 8(a) Business Development
The 8(a) Business Development Program
is a business assistance program for small disadvantaged
businesses. The 8(a) Program offers a broad scope of assistance to
firms that are owned and controlled at least 51% by socially and
economically disadvantaged individuals.
The 8(a) Program is an essential instrument for helping socially
and economically disadvantaged entrepreneurs gain access to the
economic mainstream of American society. The program helps
thousands of aspiring entrepreneurs to gain a foothold in
Participation in the program is divided into two phases over nine
years: a four-year developmental stage and a five-year transition
The overall program goal is to graduate 8(a) firms that will go on
to thrive in a competitive business environment. There are some
requirements in place to help achieve this goal. Program goals
require 8(a) firms to:
- Maintain a balance between their commercial and government
Limit on the total dollar value of sole-source contracts that an
individual participant can receive while in the program: $100
million or five times the value of its primary NAICS code.
To make sure 8(a) firms are on track to accomplish their goals and
are following requirements, the SBA district offices monitor and
measure the progress of participants through:
- Annual reviews
- Business planning
- Systematic evaluations
In addition, 8(a) participants may take advantage of specialized
business training, counseling, marketing assistance, and
high-level executive development provided by the SBA and our
resource partners. You can also be eligible for assistance in
obtaining access to surplus government property and supplies,
SBA-guaranteed loans, and bonding assistance for being involved in
What are the benefits of the 8(a) Program?
1. You will have access to sole source/non-competitive contracts with a value of:
2. You will have access to competitive set-aside contracts with a value of:
- $4M and under for all services related contracts
- 6.5M and under for manufacturing related contracts
3. You will severely limit your potential competition.
- $4M and over for all services related contracts
- $6.5M and over for manufacturing related contracts
4. It is easier for your federal prospects to buy from you.
- There are less than 7,000 active 8(a) participants in the entire 8a Program (As of May 2017).
- The big-guys (Lockheed Martin, CSC, EDS, Halliburton, etc.) cannot compete for these contracts.
5. It is a much faster contract award process.
- 8(a) contracts require much less paperwork, time and bureaucracy than most other procurement methods.
- 8(a) contracts cannot be protested.
- 8(a) contracts take about 1/10 the amount of time to be awarded compared to most other procurement methods.
6. 8(a) firms can form Joint Ventures and teams to bid on contracts.
- You will have the ability to perform larger prime contracts and overcome the effects of contract bundling, the combining of two or more contracts together into one large contract. Also through the SBA Mentor Protege Program it will allow your firm to learn the ropes from other more experienced businesses.
What are the basic eligibility
requirements to get 8(a) Certified?
Generally, to be approved into the 8(a) Program and become
certified you must meet these basic eligibility
- All applicant(s) must be a US Citizen. (Applicant = The 51% or more owner or anyone else who is considered the applicant for 8(a) Certification purposes)
- The applicant(s) must devote full-time to the business that is applying for 8(a) Certification at the time of application submission. This means that they must work at least 40 hours per week in the business concern without any other outside employment.
- The primary applicant must hold the highest management position within the business that is applying for 8(a) Certification. Generally this is the CEO, President or Managing Member.
- The primary applicant must be able to demonstrate that they are the highest compensated in the business that is applying for 8(a) Certification. Generally the SBA will deny your 8(a) application if you cannot demonstrate the applicant currently is the highest compensated or there is a very good reason why they have elected not to be.
- The applicant(s) must have an adjusted net worth of less than $250,000 at the time they apply for 8(a) Certification. Adjusted net worth = Assets - liabilities - (Equity in primary residence + value of ownership interest in business concern + IRA/401(k) or Other Retirement Accounts subject to a penalty for early withdrawal). Complete our adjusted net worth calculator to help determine yours.
- The applicant(s) AGI (Adjusted Gross Income) cannot be more than $250,000 averaged over the last three tax years. If you suspect you might exceed this, we have an AGI Analysis to help determine your AGI
- The applicant(s) cannot have transferred any personal assets during the last two years to an immediate family member for less than fair market value.
- If the applicant(s) are not a member of one of the SBA's designated groups they must also be able to submit a narrative statement of social disadvantage.
- The applicant(s) must generally hold all licenses or professional certifications required to operate the business concern. The only exception is if the individual who holds the license or professional certification is not an equity owner and the applicant(s) can prove that they have supervisory control of this individual.
- The applicant(s) and any other owner in the business or who is considered a key officer, employee or director cannot have any delinquent SBA loans, federal (taxes), state (taxes), liens, or local obligations unless they can provide proof of a payment arrangement agreement with the associated party along with copies of timely payments being made. All liens must be satisfied.
- The applicant(s) and any other owner in the business or who is considered a key officer, employee or director cannot have used their eligibility to qualify another 8(a) concern or been an officer of another current or past 8(a) participant.
- The applicant(s) and any other owner in the business or who is considered a key officer, employee or director cannot have an immediate family member who is or has been a participant in the 8(a) Program unless this other business was is in a totally separate line of business.
- The business concern, applicant(s) and any other owner in the business or who is considered a key officer, employee or director cannot have filed for bankruptcy in the last 7 years unless the bankruptcy has been discharged by the court.
- The applicant(s) and any other owner in the business or who is considered a key officer, employee or director should generally not be involved in any pending civil lawsuits.
- The applicant(s) cannot have any ownership in another business concern other than the business concern that is applying for 8(a) Certification
- Any other owner in the business or who is considered a key officer, employee or director who has ownership interest in any other business, other than the business concern that is applying for 8(a) Certification may possibly cause the SBA to affiliate the associated business. Please call for further clarification.
- Any other owner in the business or who is considered a key officer, employee or director who has ownership interest in any other business cannot be the former employer of the applicant(s) for 8(a) Certification.
- The applicant(s) and any other owner in the business or who is considered a key officer, employee or director cannot be debarred from doing business with the federal government.
- The applicant(s) and any other owner in the business or who is considered a key officer, employee or director cannot be on probation or parole. If the anyone has been arrested in the past it does not automatically deny them unless they were convicted of a specific crime. Having an arrest, regardless of how long ago, will severely delay the review of your 8(a) Application by a minimum of 90+ days.
- The business concern must be considered small by the SBA. Your primary NAICS code, gross sales and sometimes the number of employees define your size standard that the SBA will base its determination on.
- The business concern must have been in business for 2 full years. In addition, the last two years of its filed tax returns must show a reasonable amount of revenues. If it has not, you must seek a waiver and meet the 5 conditions set by the SBA to overcome this condition.
- The business concern and the applicant cannot have any delinquent tax filings or have any cannot have any delinquent SBA loans, federal (taxes), state (taxes) ,liens, or local obligations unless they can provide proof of a payment arrangement agreement with the associated party along with copies of timely payments being made. All liens must be satisfied.
- The business concern must be at least 51% directly owned by the applicant. The business concern must be a for-profit business and cannot be classified as a broker or be a subsidiary of another business concern.
- The business concern's current financial statements must exhibit positive net income, positive net equity and positive working capital at the time of application submission.
- The business concern cannot be earning more than 70% of your total revenue from one (1) billable client in the current year. Your past and current 2 to 3 years of contract mix must show that you no have earned more than 70% of your total revenue from one of your billable clients. Note. The 70% rule does not apply if your direct billable client is a federal, state or local government agency.
- If the business concern has existing management, joint venture, indemnity, consulting, distributorship, license, trust or franchise agreements, the SBA will want to review these in great detail. Please call for further clarification.
- If changes of ownership have occurred to the business concern in the past two years, and the current applicant(s) have become the new majority owners, the SBA will want to examine these ownership changes in great detail. This can possibly be an eligibility issue based upon your unique circumstances. Please call for further clarification.
- If the business has ownership in or an affiliation with another business the SBA will want to examine this in great detail. Please call for further clarification.
- If another business has ownership in the business concern applying for 8(a) Certification, the SBA will want to examine this in great detail. Please call for further clarification.
- If the business concern buys from, sells to, or uses the services or facilities of any other business concern, or conduct business with any other business concern in which any other owner in the business or who is considered a key officer, employee, other than the applicant(s), the SBA will want to examine this in great detail. Please call for further clarification.
- The business concern applying for 8(a) Certification cannot have been previously approved for the 8(a) program.
- If any other business concern or anyone who is considered a key officer, employee, other than the applicant(s) provides financial, bonding support, licenses, or required professional certification, office space or equipment to the business concern that is applying for 8(a) Certification, the SBA will want to examine this in great detail. Please call for further clarification.
- The business concern applying for 8(a) Certification cannot be started with the assets of a previously certified 8(a) program participant.
- The business concern must not be subcontracting out more than the allowable percentages. Please call for further clarification.
- Please Note. The above are the general 8(a) eligibility requirements! There may be more eligibility requirements based upon your unique business circumstances.
Not sure if you qualify for the SBA 8(a) Program?
Just call us at 813-333-5800 to go through our
Interview. If you prefer, you can also setup a convenient time for a free 15 minute
consultation by selecting the button below:
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What type of Information will need to
be collected and provided to the SBA?
Keep in mind that each 8(a) Application is unique and document
requirements vary for each 8(a) Application. Below is a general
list of items that will need to be included within your
application. Your unique application may require additional items not specified below.
- Current SAM.GOV and SBA DSBS profile print-outs
- A complete copy of your SBA 8(a) Electronic Application including all Forms (SBA Checklist, Notarization Form, 1010, 1010-IND, 1623, 1790, 413, 4506-T, 912)
- Supporting enclosures to each "Yes" question answered on the SBA forms. Please note. Unique enclosures are required based upon your circumstances.
- 1040 tax returns (last three filing years)
including all schedules, attachments, W-2s, 1099's and proof
of payment for any tax owed for each 8(a) Applicant and anyone
else who owns more than 10% interest in the business or who is
considered a key officer, employee or director.
- Business Federal tax returns including all schedules and
attachments for the last three filing years, or as many as you
have been in business, if less than 3 years.
- Balance Sheet, Income Statement, A/P and A/R aging
statements no older than 30 days old for the current year to date and also for the last
three years. Please note, your financial statements must be
prepared either on an income tax basis or be GAAP compliant.
- A resume for each 8(a) Applicant and any other key officer,
employee, director or 10% or more owner.
- A detailed listing of and copies of current and past federal
and non-federal contracts and invoices for the last two
completed fiscal years
- At least 2-3 letters of reference from current and/or past
- A current certificate of good standing (required for
Corporations and LLC's only)
- Stock certificates/Stock ledger (Corp), Membership
- Articles of Incorporation/Organization/Partnership
- Foreign Organization Filings and associated Certificates of Good Standing (If applicable)
- Articles of Conversion/Buy-Sell Agreements, Voting Agreements (If applicable)
- Bylaws, Operating Agreement or Partnership Agreement
- Stockholder/Board or Member Meeting minutes (organization
and last two years)
- Organization chart
- Proof of US Citizenship (if required)
- Business bank signature cards
- Copies of all business and special licenses
- Copies of any business loan agreements
- A brief history of the business
- A copy of the lease agreement for business. If you operate
out of your home, a letter of explanation to
the SBA along with a copy of the deed or home lease agreement.
- Copy of your current business insurance declaration
- Copies of personal financial statement supporting statements
(e.g.; Checking/Savings, IRAs with terms and conditions, Life Insurance (Cash Surrender only), Stocks/Bonds, Mortgage, Deeds, Fair Market Value for Real Estate, Home Owners
Insurance Policy, Any Other Assets (Boats, RV's, Motorcycle, Other Business Ownership, etc.), Automobile title/Registration and associated loans, Credit Cards, Home equity or any other Loan Agreements (Student, etc.)
How long does it typically take to get
8(a) Certified once the 8(a) Application is submitted?
Once you submit your 8(a) Application to the SBA for review,
you will typically receive an email within 2 business weeks that
identifies your SBA reviewer. Your SBA reviewer, may at this
time, request additional information to answer any questions
they may have. This is a normal practice by the SBA. Once the SBA has determined that your 8(a)
Application is deemed complete, it will take approximately 90
days to be notified of a decision by the SBA.
What length of time may a business participate in the 8(a) Program?
A business that receives 8(a) Certification may a program term of nine (9) years from the date of approval. The business must maintain its 8(a) Program eligibility during its time in the program and must inform the SBA of any changes that would adversely affect is eligibility. A business that completes it 9 year term is deemed to graduate. The 9 year term may be shortened only by termination, early graduation or voluntary graduation.
What are the minimum requirements to qualify for a length-of-Time in Business Waiver?
If your firm has not been in business for two (2) full years with sufficient revenue shown on its filed tax returns for the last 2 years you can possibly seek a length-of-time in business waiver if you meet the following minimum conditions.
1. A resume that shows that the 8(a) applicant has significant managerial and technical skills needed to operate the firm.
Note. If licenses or certifications are required by the business the applicant for 8(a) Certification must be the qualifier and provide proof of such license or certification.
2. At least (one) 1 year of filed company tax returns with sufficient revenue (e.g. 75-100K) earned in the primary NAICS code in which you are seeking 8(a) Certification.
3. Proof of multiple completed and ongoing contracts that clearly show operating revenues being earned in the primary NAICS code in which you are seeking 8(a) Certification.
Note. If your contract revenue earned from inception shows that you have earned more than 70% of your total revenue from one (1) billable client you will not be able to apply.
Your past and current contract mix must show that you have earned and are earning less than 70% of your total revenue from one of your billable clients.
Note. The 70% rule does not apply if your direct billable client is a federal, state or local government agency.
4. Copies of all paid invoices to support the operating revenue earned from the contracts.
5. Copies of all business bank account statements that prove the operating revenue earned has been deposited in the business bank accounts.
6. The business must have, in the bank, working capital to support its ongoing operations for at least 3 months with its current monthly burn-rate. A business line of credit in lieu if not enough liquid working capital may suffice.
7. At least two to three reference letters from past and current clients directly addressed to the applicant.
What is this 70% Economic Dependence Rule?
Economic Dependence is a significant obstacle to the eligibility of many applicants desiring to gain 8(a) Certification for their firms. In fact, it is currently the issue for which we have to turn the greatest number of potential applicants away, until the issue is resolved.
First, a little history on the Economic Dependence issue, or the 70% rule as we often refer to it. Per the Faison Office Products Office of Hearings and Appeals case in 2007, an applicant can be found to be dependent upon a single non-government entity if that entity constitutes 70% or more of the total revenues.
Businesses frequently start with a single client. The application of this rule, and the timeframe for calculating this percentage, makes this an issue that must be examined closely.
In the past, such figures have been calculated by the SBA Area Size Manager over the previous fiscal year, or over the last 12 months. The Size Manager will review the last three years of revenues, and thus revenue history even out beyond the last 12 months may be a factor in the final determination. However, the 2013 OBTek OHA case found that the SBA could not reach into the past to determine this economic dependence, if the applicant “can prove, by clear and convincing evidence, that its interests are separate from those of the other concern”. The applicant met that burden. In this case the court found against economic dependence due to the fact that the applicant’s revenues from a single entity had diversified to below 70% (only 18%), over a period of one month, which was the month immediately prior to certification.
This case continues to change the understanding of this issue, and its impact on 8(a) eligibility. For some potential applicants, this means that this issue may be overcome in a relatively short time period, depending upon the circumstances. This case implies that the month immediately prior to application must demonstrate that there is not a 70% issue based on the revenues deposited in the company bank account. This should also be true during the month that a firm applies, and be able to be sustained for the duration of the application processing period, which can be six months or more. The SBA reserves the right to request updated information at any time during the application process.
However, the OBTek OHA case had a very specific set of circumstances, which may not match the scenario of each potential applicant. If you think that your firm may face a challenge on the 70% issue, we recommend that you speak to a qualified consultant before determining whether to proceed with an application for 8(a) Certification.
The risks are greater than merely a denial of 8(a) Certification. If a firm is found to be economically dependent upon another entity, and a resulting size determination concludes that they are other than small, that would exclude the firm from being recognized as a small business for the purposes of contract awards. This could be devastating to a small business.
To determine if you meet the 70% rule. Visit our blog posting to see an easy flow chart that will help identify any issues you might have.
How do I compute my Adjusted Net Worth?
Among the many 8(a) business development program eligibility requirements, the applicant for 8(a) Certification must have a personal adjusted net worth of less than $250,000 at the time of 8(a) Application submission.
The algorithm used to determine Adjusted Net Worth for 8a Certification purposes is:
Adjusted Net Worth = Personal Assets – Personal Liabilities – [Equity in primary residence + value of ownership interest in applicant business + value of any IRA/401(k) or other retirement account that are subject to a penalty for early withdrawal]
If the applicant is married and the asset or liability is jointly held, you split the value 50/50. If the applicant is married and lives in a community property state, you only split assets and liabilities 50/50 if you have a transmutation or pre/post nuptial agreement that states otherwise.
How can I determine my Adjusted Worth?
You can easily determine your Adjusted Net Worth by using our adjusted net worth calculator.
What is required to be submitted within the 8(a) Application to prove the applicant’s Adjusted Net Worth?
Each applicant, and their spouse, must submit a separate SBA Form 413, Personal Financial Statement. Along with the SBA Form 413 you must also submit statements for each asset or liability supporting the amounts reported. These statements cannot be any older than 30 days at the time of 8a Application submission.
Are there any ways to reduce an applicant’s Adjusted Net Worth below the $250,000 threshold?
For more information, contact us.
*Important* You cannot transfer an asset out of the applicant’s name within two years of the time you apply for 8(a) Certification for less than fair market value. Doing so will result in the full amount of the asset being re attributed back to the applicant.
What is the Narrative Statement of Economic Disadvantage?
Updated (August 29, 2016). As of August 24, 2016 you are no longer required to prepare and provide a Narrative Statement of Economic Disadvantage to the SBA as part of your 8(a) Application.
Here is the link to the Federal Register Rule that goes into effect on August 24, 2016 regarding the Narrative Statement of Economic Disadvantage.
Specifically, within it under item: 8(a) BD Application Processing (13 CFR 124.202, 124.203, 124.104(b), and 124.108(a))
In addition, SBA's regulations provide that each individual claiming economic disadvantage must describe such economic disadvantage in a narrative statement, and must submit personal financial information to SBA. SBA believes that the written narrative on economic disadvantage is an unnecessary burden imposed on applicants to the 8(a) BD program. SBA's determination as to whether an individual qualifies as economically disadvantaged is based solely on an analysis of objective financial data relating to the individual's net worth, income and total assets. As such, this final rule eliminates the requirement that each individual claiming economic disadvantage must submit a narrative statement in support of his or her claim of economic disadvantage.
What is the definition of immediate family member?
Immediate family member means father, mother, husband, brother, sister, grandfather, grandmother, grandson, grand-daughter, father-in-law, and mother-in-law.
How do I register for a Dun and Bradstreet Number?
To register for a Dun and Bradstreet profile please visit http://fedgov.dnb.com/webform. You should be able to register for this account and receive a DUNS number very quickly through this link. If you register through http://www.dnb.com it will take longer.
Where can I view the latest SBA 8(a) Regulations?
You can view the latest SBA 8(a) Regulations or CFR: Title 13:Part 124 by clicking here.
How do I determine my primary NAICS code?
Your primary NAICS (North American Industry Classification System) code is the six digit code that your business earned its largest segment of revenue in, in the most recently completed fiscal year. The primary NAICS code help the SBA determine what industry you are operating in and if you are classified as a small business. Visit the US Census Bureau to determine your primary NAICS code.