SBA 8a Certification Explained

Posted by Aaron Kowalski on July 23, 2010 under Small Biz Certifications, Small Biz News, Small Biz and Entrepreneurship | Be the First to Comment

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.

WBE Certifications: Third-Party vs. Government

Posted by Nina Lopez on February 17, 2010 under Small Biz Certifications, Small Biz and Entrepreneurship | Be the First to Comment

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.

SBA 8(a) Eligibility: Do you meet the requirements?

Posted by Nina Lopez on February 8, 2010 under Small Biz Certifications, Small Biz and Entrepreneurship | Be the First to Comment

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.

Do I Need A Business Plan To Get An 8a Cert?

Posted by Nina Lopez on January 28, 2010 under Small Biz Certifications, Small Biz Planning | Be the First to Comment

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.”

The Ins and Outs of Disadvantaged

Posted by Jonathan Cajigas on November 11, 2009 under Small Biz and Entrepreneurship | Be the First to Comment

During the business certification process, small business owners will undoubtedly come across the terms “economically disadvantaged” and “socially disadvantaged”. But what do these terms actually mean? This all depends on the agency responsible for granting the certification your small business wishes to obtain. Some small business certification programs allow for business owners to have a higher net worth than others, and some  limit their programs to members of certain racial or ethnic groups. These differences can be significant from program to program, and it is recommended that you work with a competent professional in order to guide you through the business certification process, including which certifications your small business may qualify for. In order to keep things simple, we will focus on defining social and economic disadvantage for the Small Business Administration’s 8(a) Business Development program, or the SBA 8(a).

The Small Business Administration’s 8(a) Business Development program was created in order to provide contracting opportunities to minority-owned and other disadvantaged businesses. The SBA considers two factors when certifying a business as disadvantaged -whether or not the qualifying owner has been subject to prejudice resulting in a negative impact on their advancement in the business world, and the net worth of the qualifying owner. To keep matters simple, a socially disadvantaged individual whose net worth is less than $250,000 will be considered economically disadvantaged, but what exactly does “socially” disadvantaged mean? The SBA automatically presumes the following individuals to be socially disadvantaged:

• Black Americans
• Hispanic Americans
• Native Americans
• Asian-Pacific Americans
• Subcontinent Asian-Americans

But what about persons who have experienced social disadvantaged as a result of other factors, such as service-disabled veterans or other Americans with disabilities? These individuals are not presumed to be socially disadvantaged, and as a result, must provide a preponderance of the evidence detailing their personal experiences of substantial and chronic disadvantage in American society. This evidence must be presented in the form of a narrative that is to be included with the 8(a) business certification application. It is important to note that no one can guarantee whether or not a person who is not a member of an above-designated group will be granted disadvantaged status by the SBA, and subsequently, have their business certified under the 8(a) program. However, the SBA does provide general guidelines for factors that are considered when determining whether or not a person is socially disadvantaged, such as access to education, employment, and business credit or capital.

If you are unsure as to whether or not your business meets the criteria for 8(a) certification, work with a competent professional who will be able to determine if you possibly qualify for business certification under this program, and who will also assist you in drafting an effective statement of economic and social disadvantage. By doing so you will greatly increase your business’ chances of being certified under the 8(a) program, and ultimately, being awarded lucrative government contracts under this program.

Stage 2 Throw-Up of your Small Business Life Cycle

Posted by Nicole Rivera on March 17, 2009 under Small Biz and Entrepreneurship | Be the First to Comment

Every small business will inevitably go through three stages of a life cycle: start-up, throw-up and grow-up, (As stated by Jay Goltz, in an article on CnnMoney.com).  For those of you who haven′t been there yet, it is the point usually between 6 months to 2 years after your initial start up, where you find that your business is not meeting the expectations first projected.  Mr. Goltz gave a fine example on how stage two can come about very quickly and unexpectedly through faulty accounting.  In addition, I believe there are many other variables that can lead to the throw-up stage.

Each of the variables below can either make or break a small business.  If you have found yourself in the throw-up stage, take a few minutes and ask yourself the following questions:

1) Do you resist changing with the times? Take a look around you-the world is not the same way it was 8 months ago, let alone 10 years ago.  Times change and so do market trends, communication capabilities and business tactics, (to include a few examples:  the explosion of online social networks, SEO, viral marketing and blogging). Traditional methods of doing business are not to be forgotten, but you must learn to integrate these methods with a new laundry list of tactics.

2) Do you practice outstanding, excellent and rewarding customer service? Remember the first rule of thumb- “If you don′t take care of your customers, someone else will!” Too often poor customer service can lead to a grapevine of bad publicity and referrals.  Word of mouth can be one of the strongest influencers when one is making a decision.  Don′t believe me? Check out these stats: 67% of all consumer decisions are primarily influenced by word of mouth (McKinsey/Thompson Lighthouse) and  90% of customers identify word of mouth as the best, most reliable and trustworthy source about ideas and information on products and services (NOP World).

3) What marketing and self-promotional initiatives are you practicing? I understand that most entrepreneurs probably have a tight wallet, but a small budget is no excuse to eliminate marketing and pr from your business structure.  Recently, I spent a lot time on some of the top 50 social tools on the web, including (Facebook, Twitter, Furl, Digg and more).  These sites are no longer just for picture posting of the latest college mixer! Large and small businesses alike, have adapted these tools as a way to gain leads and build presence on the web. Utilizing these tools, will act like a bull horn for your company new, updates, questions, promos and comments.

4) Do you know your competition? What are their strengths and weaknesses? Think back to your high school football team.  Usually every night before a big game the team would review “film” from the opposing team′s recent games.  Your home team would take notes, observe tendencies and learn the competitor′s weakness.  The next night, your home team was prepared and ready to take home a victory! The same goes for business, you cannot compete if you don′t know who your competition is!

However it is that your business found itself in the throw-up stage, don′t forget there is light at the end of the tunnel, but not without a lot of hard work and re-evaluation of your current business structure.  In many cases you will have to start at the core of the problem and work your way through this mess, but in the end you will come out stronger and more confident in the future success of your business!

Certifying Your Small Business

Posted by Nicole Rivera on September 24, 2008 under Small Biz and Entrepreneurship | Be the First to Comment

Many contractors are unaware of the numerous small business certification and assistance programs that exist today to aid underprivileged businesses. In fact, many of these programs are aimed specifically at overcoming the effects of discrimination, which may be a significant obstacle for such individuals to conquer. Here at BizCentral, we seek to create increased awareness of these opportunities, as well as to assist socially and economically disadvantaged firms in obtaining the credentials necessary to compete with larger entities.

Numerous government entities, including the Small Business Administration and Women”s Business Enterprise National Council offer innovative opportunities to assure that small contractors are not left behind in the race for federal contracts. Programs such as the SBA’s 8a teach small companies how to compete in the federal contracting arena and how to take advantage of greater subcontracting opportunities available from large firms as the result of public-private partnerships. For more detailed information on the most common certification programs, check out:

•SBA- 8a or SDB
•Women’s Business Enterprise National Council
• Minority Supplier Development Council
• HUB Zone
• Veteran Owned Business
• Department of Transportation

Nonetheless, the process for applying for inclusion in these programs can be grueling. You must meticulously review application requirements and organizational documentation to assure that each your business has the greatest chance at successfully obtaining certifications and subsequently competing for beneficial contracts, thus bolstering profits. These programs are, in effect, the gateway to opportunity for small contractors and subcontractors.