There are many certifications that can greatly benefit small businesses, such as: WBE, DBE, MBE, HUBZone and more. Yet, one of the least understood and most often misunderstood certifications is the SBA 8a certification. The SBA’s 8a BD Program, named for a section of the Small Business Act, is a business development program created to help small disadvantaged businesses compete in the American economy and access the federal procurement market.
In order to qualify for the SBA 8a Certification the business must:
Be a small business
Be unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States
Demonstrate potential for success
The SBA defines a small business concern as one that is independently owned and operated, is organized for profit, and is not dominant in its field. Depending on the industry, size standard eligibility is based on the average number of employees for the preceding twelve months or on sales volume averaged over a three-year period. Examples of SBA general size standards include the following:
Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured
Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided
Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided
Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided
General and Heavy Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction
Special Trade Construction: Annual receipts may not exceed $7 million; and
Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the agricultural product
The SBA defines socially disadvantaged individuals as those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as members of a group. Social disadvantage must stem from circumstances beyond their control. In the absence of evidence to the contrary, individuals who are members of the following designated groups are presumed to be socially disadvantaged:
Black Americans
Hispanic Americans
Native Americans (American Indians, Eskimos, Aleuts, and Native Hawaiians)
Asian Pacific Americans (persons with origins from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam, U.S. Trust Territory of the Pacific Islands [Republic of Palau], Commonwealth of the Northern Mariana Islands, Laos, Cambodia [Kampuchea], Taiwan; Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the Marshall Islands, Federated States of Micronesia, Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru; Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal), and ,members of other groups designated by the SBA.
The SBA defines economically disadvantaged as socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities. An economically disadvantaged individual’s net worth, after excluding the individual’s equity in the firm and the equity in the primary residence, may not exceed $250,000. SBA will also consider the individual’s average two-year income, fair market value of all assets, access to credit and capital, and the financial condition of the applicant firm in evaluating economic disadvantage.
In order to be eligible for the 8a certification the SBA requires that at least 51% of the applicant firm is directly and unconditionally owned by socially and economically disadvantaged individuals.
The SBA considers the business’ potential for success requirement based on the following:
the technical and managerial experience of the applicant firm’s managers
the firm’s operating history
ability of the firm to access credit and capital
the firm’s financial capacity
the firm’s record of performance
whether the applicant firm or individuals employed by the firm hold the requisite licenses if the firm is engaged in an industry requiring professional licensing
Also the small business must have been operational for at least two full years as evidenced by business income tax returns for each of the two previous tax years which show operating revenues in the primary industry in which the applicant firm is seeking 8a certification.
By having a better understanding of the 8a certification, its benefits, and requirements you should be able to determine if your small business would qualify for this extremely beneficial certification. If you don not qualify, there are still many options available for small disadvantaged businesses. Some of these include getting a MBE certification, DBE certification or getting certified as a women owned business. Regardless of which certification/s your small business qualifies for, any and each certification will prove to be a valuable asset for years to come.
Being 8(a) certified is a great resource for small businesses. Unfortunately many businesses have eligibility issues when their yearly review information makes them ineligible or they do not submit them at all.
In order to stay 8(a), certified small businesses must submit documents to be reviewed annually. The SBA is required to review each 8(a) firm’s program eligibility every year on the firm’s certification anniversary date. This office sends each participant a request for the required Annual Review documents and information shortly before the end of your program year which contains the date that your submission is due back to your Business Development Specialist (BDS). If it is not received by the due date, you will be sent a reminder and a second due date. If the information is not submitted by this second date, SBA’s rules & regulations require us to start program termination proceedings against your firm. The termination process may result in the loss of your 8(a) certification. Once it is lost you cannot be certified in the program again. Since annual reviews are done every year on your anniversary date, you should be prepared for it and comply on time.
Your year end financial statements must be signed, dated and their accuracy verified by an authorized officer, partner, or sole proprietor of the concern. 8(a) certified small businesses with annual receipts of less than $1 million may submit statements prepared in-house, in accordance with “generally accepted accounting procedures” or have a compilation statement prepared by a qualified CPA or independent public accountant. Those firms with sales of more than $1 million and less than $5 million must provide reviewed statements, prepared by a qualified CPA or independent public accountant. Statements are due within ninety (90) days after the close of the company fiscal year.
Those firms with total sales of $5 million and over are required to submit audited financial statements prepared by a CPA or independent public accountant. Those firms who will be submitting audited statements are allowed an additional 30 days due to the added complexity. The company’s sales figures on the Profit and Loss Statement must show the break-down of 8(a) and non-8(a) sales, if applicable. The submission of proper, year end financial statements, (Balance Sheet and Profit and Loss Statements) is mandatory as a condition of 8(a) certification program participation, as noted in your signed 8(a) Participation Agreement. Firms who are delinquent in submitting annual financial statements are ineligible to receive 8(a) contract awards. In addition program termination proceedings may be initiated if financial statements are not received in this office by the required due date. Most 8(a) small businesses have calendar fiscal year end date (December 31). While the financial statement due date might correspond with the time that your accountant is doing your business & personal tax returns, there is no provision for any extensions to the financial statement submission date. Make sure that your CPA is aware of this mandatory 8(a) compliance requirement.
Making sure that your small business submits your annual review each year and making sure that the information that you submit is accurate and in line with the SBA’s standards is extremely important to ensuring your small businesses ability to remain 8(a) certified.
If you are a small business owner that is interested in attaining the MBE certification here are some key points that you should consider before taking on this project. Minority Business Enterprise Certification is the process that a small business claiming to be a minority owned business must undergo to validate the company’s majority (51%) ownership by a minority or group of minorities. This minority individual or group of individuals must own, manage and be involved in the daily operations of the business enterprise. Very similar to the Woman Owned Business Enterprise Certification (WBE), the MBE exists on various levels. If you qualify for this certification, a great place to start your search is on the local level. Many cities and counties have an MBE program that would benefit your business with local government contracts. If your business is able to offer services on a state wide level you should look into your specific states program. Any state program would allow your business to participate in bidding and contracting on the federal level for your state. If federal and local government contracts is not what you are interested due to your service and product offerings your small business may benefit most from the national certification.
When considering the national MBE program it is most beneficial to certify with the National Minority Supplier Development Council (NMSDC). The NMSDC exists to provide a direct link between corporate America and minority-owned businesses. The NMSDC is one of America’s leading business membership organizations. It was chartered in 1972 to provide increased procurement and business opportunities for minority businesses of all sizes.
Certification is now more important than ever for small businesses. Major corporations include supplier diversity as a core business strategy, and use certification as a tool to validate and seek qualified minority businesses. Local and statewide government agencies are mandated to award different percentages of their contracting and bidding opportunities to minority owned businesses. It is crucial to understand that while the process for certification can take approximately 30 – 90 days the benefits certifications render far outweigh the time and effort invested.
If you are still considering whether you qualify for certification please feel free to reference this quick four step guide:
Ownership - A minimum of 51% ownership by one or more socially disadvantaged individual(s).
Minority Status – Certain groups are presumed to be socially disadvantaged (variations also exist on the state and federal levels):
African American
American Indian/Native American
Asian
Hispanic
Control – The minority applicant(s) must have experience relating to the specific products and/or services provided by the firm. It is also crucial that this applicant or group of applicants hold the authority to make day-to-day and long term business decisions for the firm.
Size – The applicant firm must meet the small business size standards established by the U.S. Small Business Administration (SBA). Size standards are measured by average annual gross receipts (ranging from $750,000 to $35,500,000 depending on industry) or average number of employees (ranging from 500 to 1,000 depending on industry).
If you need additional information about the NMSDC please visit their website by accessing the following link: http://www.nmsdc.org/nmsdc/
A Webinar about Getting Certified & Securing Opportunities as a Women or Minority Owned Business!
Are you a women or minority owned business that has not yet applied for a WBE or MBE certification? If so, you could be missing out on dozens of opportunities set aside solely for your small business!
There are numerous government agencies at the local, state or federal level that can provide you with a women or minority business certification. Whether you are just starting a business or your company is already established, you can drastically benefit from these MBE and WBE “set aside” contracts.
We invite you to spend a valuable hour with BizCentral USA, and learn the benefits and steps to becoming a WBE and/or MBE certified small business!
Topics of Interest:
•Eligibility for WBE and MBE Certification
•Getting Registered
•Supporting Documentation
Don’t wait any longer to get your small business certified. Take advantage of the certifications that are available today by attending our FREE webinar on Wednesday, June 2, 2010 from 3:00 p.m. – 4:00 p.m. (EST).
A Webinar about Securing Opportunities the Right way with SBA 8a!
If you have started a business and are now looking for business opportunities, getting your SBA 8a certification is the next step to success!
There is no better time than now to make the investment and seek SBA 8a certification. With all of the new federally funded project money that is flowing into states, certified SBA 8a small business are at the right place, at the right time.
We invite you to spend some invaluable time with BizCentral USA, and learn how to make the investment and seek SBA 8a certification.
Topics of Interest:
•Eligibility for SBA 8a
•Getting Registered
•Supporting Documentation
Don’t wait any longer to get your small business certified. Learn how to take advantage of the numerous certifications that are available for your small business by attending our FREE webinar on Monday, May 10, 2010 from 3:00 p.m. – 4:00 p.m. (EST).
Acquiring an 8(a) Certification can be extremely beneficial to your business. Federal acquisition policies encourage Federal agencies to award a certain percentage of their contracts to Small Disadvantaged Businesses Certified businesses.
In order to be eligible for an 8(a) certification:
You must be a small business based on size standards for small businesses in your industry
You must be U.S. citizen
You must be the majority owner of the business owning at least 51%
You must work full-time in your business
You must run the day-to-day operations of the business
Control of your board must be exercised only by disadvantaged persons. 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)
Socially Disadvantaged Groups (African Americans, Native Americans, Hispanic Americans, Asian Pacific Americans, and Subcontinent Asian Americans) Other individuals can be admitted to the program if they show through 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 be the responsibility of the disadvantaged individual
You must be an economically disadvantaged individual (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 good moral character
You must not operate a business that is not eligible for certification (Broker or Non-Profit)
Many different small business certifications exist. Depending on where your business is located there are county, city, and state certification programs that exist in order to disburse and diversify government contracts. Each program has qualifying factors or industry specific requirements that your business will have to meet.
If you are transportation, construction, or an alternate construction support company, your business would most benefit from a Disadvantaged Business Enterprise certification. The Disadvantaged Business Enterprise certification (also known as DBE) is normally run through your state’s Department of Transportation. The DBE is more industry specific and helps to certify small businesses.
In order to qualify, the majority of businesses owner(s) must have a personal net worth of less than $750,000. Many business owners see this requirement and decide not to move forward in the process. The majority owners are the qualify factors and their net worth is calculated separately from all business accounts and assets. The owner’s personal residence is not calculated as an asset but it must be disclosed as your residence. Once the business owner decides to move forward with the process, they apply and provide all supporting documentation for the certification.
Due to the recent influx of applications for these programs, each office has an average processing time of about 90 days. This process cannot be expedited and each application is processed in order of submission and complexity. The key to experiencing a very smooth and seamless certification process is to ensure that all paperwork is accurate and complete. Incomplete applications are returned with a request for additional information. For more information on the specific office to reference for your state, please follow the link provided below.
When looking at the Woman/Women Owned Business Enterprise (WBE) Certification, the question I get asked most frequently is. “Is there really a difference between which WBE certification I receive?” The very honest answer to this question is yes. It makes a large impact which agency you choose to certify your business through. If your business is 51 percent owned, controlled, operated, and managed by a woman or group of women then you are eligible for certification. There are generally four different levels of WBE certifications:
1. Local – This certification can be obtained by a local government certifying office, such as a city or a county. You would want to obtain a local certification if you want to increase your chances of getting business from that particular local agency (such as the city or county in which your business is located).
2. State – This certification can be obtained in most (not all states have a designated program) states through a state certifying office. You would want to obtain a state certification if you want to increase your chances of getting business from one or more state government agencies.
3. Federal – These are self-certifying, and allow you to sell to the U.S. federal government. So if you want to sell to the federal government, then you can self-certify that you are a WBE enterprise.
4. National – This is the type of certification you would consider if you want to have large corporations (both privately and publically owned) as clients. Some large corporations will accept either a National Certification or a State Certification, so before you rush out and get a National Certification, you would first want to see what the requirements are specific to that corporation.
If you are more interested in doing work in the private sector, particularly with publicly traded and privately owned companies, WBE Certification by a third-party certifier is going to be the recommended option. Third party certification (national agency) is geared to the private sector. Such agencies as the WBENC and the NWBOC are third-party certifiers. This indicates that these agencies are an independent entity other than the small business owner or the corporate purchasing entity and are ensuring that the small business is in fact a woman-owned entity.
If your small business is focused on gaining contracts with a government entity, in most cases each city, county, state and federal agency has their own type of certification program which details an individual and distinct process for that city, county, or state. Now you are probably saying to yourself, “Do I really need to get multiple certifications for different purposes?” Due to recent pressure being brought by women business groups, the government agencies are now beginning to accept other sources of certification in addition to their own program. The key, if you find yourself in this situation, is to certify with your home county or city first. By doing this, most other city and county certification programs will reciprocate your home city certification and you can start doing business with Uncle Sam.
If you are a small business owner and are considering applying for the SBA 8(a) program, here are some key eligibility requirements and pointers to help you before you invest time into the application process.
First and foremost the SBA 8(a) program only certifies firms that are currently in business. In order to apply you must be the majority owner and also involved full-time in the day-to-day management of the business to meet eligibility requirements. If you meet these requirements the next key point to consider when applying is the two year business operation requirement. The 8(a)certification program requires applicants to be in business for at least two years before their application will be considered for approval. Exceptions to this rule are sometimes granted but are not guaranteed. If you have been in business for less than two years and have successfully generated profits (this does not mean you have to been making huge profits), and have a successful track record with contract completion a waiver can be requested.
Only applicants who are members of socially disadvantaged groups and are economically disadvantaged can be considered for approval to the program. Many 8(a) applicants become ineligible for 8(a) certification due to the $250,000 net worth limit. This limit is defined as a personal net worth of $250,000 or less, excluding the equity in a personal residence or business. It is crucial not to make attempts at hiding assets from the SBA. The SBA has an extensive amount of tools and knowledge base regarding determining the size of a business and looking at two years tax returns to know what an individual’s net worth may be.
It is crucial for the SBA that as a small business owner you have enough working capital and business contracts that they deem your business eligible to have a high likelihood of success. Some planning can be done to mitigate this problem if the individual’s net worth is close to $250,000, such as selling securities and investing the money in the primary residence. Unfortunately for individuals with extremely high net worth’s it is difficult or unlikely to work around this clause in the SBA application.
Finally only applicants who are US citizens are eligible to apply for the 8(a) certification. Each year the federal government sets aside millions of contract dollars for certified small businesses to bid and receive contracts relating to the many federal agencies that exist. Many federal contracts are “set aside” for 8(a) firms, meaning that only certified businesses may apply or be considered. The designation of SBA 8(a) is a highly regarded program, if you meet these requirements you should consider pursuing this designation for your small business.
In order to do business with the Federal Government, an interested small business should become certified under the Small Business Administration’s (SBA) 8(a) program. The SBA’s mission is to maintain and strengthen the Nation’s economy by aiding, counseling, assisting, and protecting the interests of small businesses and by helping businesses and families recover from disasters. The BD (Business Development) assists firms owned and controlled by economically and socially disadvantaged individuals, enter the economic mainstream. The 8a certification process is complex and takes on average three to four months to get completed. Once you have completed the process and received your wonderful letter saying, “congratulations you have been accepted” you still have to complete a SBA form 1010C.
This is a business plan that includes a detailed marketing plan for your business. Additional required topics included within the 1010C form are as follows: executive summary, business history, business environment, products and services, as well as other crucial topics. As soon as you receive your letter of approval from the SBA you will be asked to contact your local office (these specific details will be listed in your letter) and set up an appointment to review your business plan. This meeting will help to evaluate your small business’ potential for success as a certified 8(a) participant. If you are prepared for that meeting by already having a business plan prepared, it will enable you to complete the process immediately and receive your 8a certification. In other words, you enable your small business to begin bidding and contracting.
This is the final step to the SBA’s 8(a) certification process and it can delay the process if you are not prepared with a 1010c plan. Don’t delay your firm’s ability to receive contracts because you don’t have a business plan. In the words of John L. Beckley, “Most people don’t plan to fail, they fail to plan.”
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There are many certifications that can greatly benefit small businesses, such as: WBE, DBE, MBE, HUBZone and more. Yet, one of the least understood and most often misunderstood certifications is the SBA 8a certification. The SBA’s 8a BD Program, named for a section of the Small Business Act, is a business development program created to help small disadvantaged businesses compete in the American economy and access the federal procurement market.
