SBA 8(a) Program: What it is and how it works

The U.S. Small Business Administration may be best known for: SBA loan Partially guaranteed program small business loan For qualified entrepreneurs. But sponsoring loan programs is not the only way the SBA promotes small business owners, especially economically disadvantaged small business owners. This independent federal agency also sponsors business assistance programs such as the SBA 8(a) program.

The SBA 8(a) Business Development Program helps socially and economically disadvantaged small business owners win coveted government contracts. Throughout the nine-year program, members also have access to training and technical, financial and managerial support to help them grow their business and compete for contracts.

According to the SBA, the federal government's goal is to allocate at least 5% of the federal government's annual contract budget to small businesses that are at least 51% owned and operated by socially and economically disadvantaged entrepreneurs. .

Businesses that participate in the SBA 8(a) program enjoy the following benefits:

• Opportunity to win layaway contracts and sole source contracts (contracts issued to eligible companies without competition).

• Gain access to dedicated experts to help you navigate the government contracting process.

• Through our Mentor-Protégé Program, you will receive guidance from experienced business leaders.

• Opportunities to participate in joint ventures with existing companies.

• Additional Administrative and Technical Assistance Through the SBA 7(j) Program.

To qualify for the SBA 8(a) program, applying businesses must first meet the SBA's definition of a small business. (SBA available online) size standard tools Applicants must be U.S. citizens, and the SBA also considers more qualitative factors, such as personality and likelihood of success. Also, companies can only participate in the SBA 8(a) program once, so companies that are already participating cannot reapply.

The core of the program's eligibility criteria is that a business must be at least 51% owned and controlled by economically and socially disadvantaged individuals, according to SBA's definitions of each term.

The SBA defines socially disadvantaged people as “people who are exposed to racial or ethnic prejudice or cultural prejudice within American society because of their group membership, regardless of their individual qualities.” It is defined as

The SBA also designates members of certain groups as vulnerable and therefore eligible for the 8(a) program. These groups are:

• Native Americans, including Alaska Natives, Native Hawaiians, or members of federally or state-recognized Indian tribes.

• Asian Americans of the subcontinent.

• Asian Pacific American.

For individuals who are not members of these designated groups, the SBA also considers objectively distinguishable characteristics, such as gender, identifiable disability, or long-term isolation from mainstream society, as well as racial or ethnic origin. We also recognize the social disadvantages faced by individuals with disabilities. These disadvantages must have had a negative impact on the individual's education, employment, or business history. ^[0]

The SBA defines economically disadvantaged individuals as “competing in the free enterprise system due to reduced capital and credit opportunities compared to others in the same or similar industries who are not socially disadvantaged.” “socially disadvantaged individuals with impaired abilities”.

These guidelines take into account both net worth and personal income. Net assets must be less than $850,000, excluding equity in your principal personal home and funds invested in retirement accounts. An individual's gross income for the past three years must be less than her $400,000. Please note that these exclusions in net worth calculations do not apply to asset valuations or loan applications. ^[0]

You can apply for the SBA 8(a) program online. However, the SBA also recommends meeting with your local SBA resource partner, which can be found through the SBA's website.

Before you apply, make sure your business qualifies for 8(a) certification by answering a few simple questions on the SBA's certification website. These will help you understand:

• The amount the government gives to companies in your industry based on your NAICS code.

• If your company has experience initiating federal contracts.

• Whether your business qualifies based on economic and social eligibility requirements.

If you determine that you are eligible for the program, you can begin gathering your documents using the application checklist. Specific documents vary depending on: Type of business (Example: Sole Proprietorship, LLC, S-corp) However, you will typically be expected to submit the following:

• Ownership documents such as articles of incorporation and bylaws.

• Business financial documents such as income statements, tax returns, and recent contracts.

• Personal documents such as proof of U.S. citizenship, resume, and personal tax returns.

To actually start applying to the SBA 8(a) program, you need to create a business profile on SAM.gov. This profile allows you to create an account on the certification website and ultimately submit your application. If approved, you will also update this profile to show the contracting officer that your company is participating in his 8(a) program.

If your application is approved, the SBA will notify you through the Certification Website. It may take up to 105 days from the time you submit your application. Once approved, your SAM profile will include details of your program entry and exit dates, and your local SBA office will contact you directly to provide further details.

If you have any questions about uploading support documents online, please contact us below. [email protected] Or use our online resources at our certified help desk. Businesses participating in the SBA 8(a) program must also provide ownership and management documents, NAIC codes, and fiscal year-end information to ensure that they continue to meet 8(a) requirements. Please note that the following is under review. Contract terms are up to nine years, but both the SBA and participating businesses can shorten that period.

This article originally appeared on Fundera, a subsidiary of NerdWallet.