SBA 8(a) Eligibility Requirements
Please note that SBA 8(a) program eligibility requirementschanges are subject to federal court cases.
These are fifteen core eligibility requirements for 8(a) applicants:
1. Social disadvantage: Client must be Hispanic American, Asian American, Black American, or Native American OR a person who has experienced persistent and chronic discrimination against Client on the basis of disability, gender, veteran status, race, culture, or some other factor. If Client are from one of these “non-presumed” groups, then Client will have to provide the SBA proof of the discrimination Client 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 Client cash, checking and savings accounts, real estate (except Client’s personal residence), IRAs, 401Ks, stocks, bonds, automobiles, motorcycles, RVs, and other assets. The value of Client 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 Client earned only $100K in revenue in 2010 and Client took $95K of that money for Client salary, Client is making what the SBA calls “excessive withdrawals” from Client, 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 $250,000. again.
6. Citizenship: The applicant must prove his or her American citizenship with a birth certificate, passport, or other documentation.
7. Business size: The Client 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.
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 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.
11. Age of the Company: Chronological age of the company is not as important as having two recent consecutive federal tax returns proving Client has earned revenue. No tax return? Apply to the 8(a) program later after Client has at least one tax return to show SBA (and meet all of the other early admission requirements). No revenue on Client company tax returns? Unfortunately Client will not be considered to be economically viable by the SBA at this time. Client 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.) Client attention needs to be devoted 40+ hours per week towards ensuring the success of the applicant company within the 8(a) program. Does Client own multiple businesses? If yes, the SBA will make Client prove that these other companies don’t interfere with Client 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— should 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.” Client 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 Client is struggling to keep open, then most likely Client is not a good candidate for the 8(a) program until Client 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 Client to have enough resources and finances to perform large federal contracts and expand in response to increasing federal contracting workloads.
The Gabriel Group, Inc.
1129 Montreal Drive
Corpus Christi, TX 78418
We provide application preparation for the SBA 8(a) program, the Verified SDVOB program and the WOSB program.
We also provide data security and
management, scanning, engineering drawing services, message
distribution, record and document management, administrative and
library support and maintenance.