Everything you need to know
The most coveted certification that most business owners are seeking to help them increase their potential chances of success is the Small Business Administration (SBA) 8(a) certification. The federal 8(a) certification is designed for smaller underserved businesses, it’s designed to assist and protect. Businesses whose owners hold a minimum of fifty-one percent of the business are considered both socially and economically disadvantaged.
In order to gain access to government and corporate contracts, you must obtain the proper certification. A small business certification is much like a personal certification. It provides you with a special status that will help your business compete for government contracts.
If you are a small business owner you could be missing out on a lesser-known revenue stream – “set-aside” contracts. Government agencies, along with corporations that do business with the government, are mandated by law or corporate policies. Federal contracting programs are obligated to spend approximately 20% of their budget with small disadvantaged start ups. It’s important to not confuse these funds with venture capital. This is of note since at the end of the day they are aligning with interests of small business.
For socially and economically disadvantaged small businesses, the Small Business Administration offers the 8(a) Business Development Program. This certification is invaluable for struggling businesses as it opens up the door to enable them privileged access to government contracting opportunities.
As the purchasing agent for the government, the U.S. General Service Administration (GSA) has an annual procurement spending that runs into the tens of billions. The GSA seeks to establish long-term government contracts with commercial firms to provide access to millions of commercial products and services at volume-discount pricing.
The Small Business Administration (SBA) offers the 8(a) Business Development program to assist small businesses that are owned by certain individuals. Individuals who are considered socially and economically disadvantaged, by providing them access to government contracting opportunities.
‘Set-aside Contracts: Your Ticket to The Mainstream
Many government agencies, along with large corporations in the private sector that work with various government agencies, are mandated by law and/or their corporate policies to spend a certain portion of their budget with small disadvantaged companies.
This is the part where the Small Business Administration (SBA) comes into the picture. Basically, it offers the 8(a) Business Development program that is more commonly referred to as the 8a certification. This certificate has been created to empower and assist certain small business enterprises. It applies only to those businesses that are owned by individuals that are considered economically and socially disadvantaged by the government. The core purpose of this certificate is to provide its recipients much needed access to various government contracting opportunities, especially at the federal level.
The federal government defines social disadvantage as individuals who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as members of a group. Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans and Subcontinent Asians are the five ethnic groups that are considered automatically considered disadvantaged and are not required to provide further proof of their social disadvantage. All other groups such as females, veterans, or individuals of Middle Eastern decent are not presumed to be automatically disadvantaged and are therefore required to ask for special permission through a waiver.
The federal government defines economic disadvantage as those that experience difficulty competing compared to other businesses because of diminished capital and credit opportunities. Specifically, the 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. If you own any of these you will be required to disclose the following as part of the SBA 8(a) review process:
- A 401k,
- Other personal assets,
Technical Skills and Expertise
One of the critical elements that the SBA reviews when considering if a small business is a good fit for the 8(a) certification is whether or not the disadvantaged owner has the business or technical skills and expertise needed to successfully operate his or her business. So a good business plan is a must. Any work in industries that require a special state-issued license in order to provide services such as trucking, plumbing, electrical, construction, engineering, dentists/physicians, hair dressers and veterinarians must be active and held by the socially and economically disadvantaged owner.
The SBA will consider on a case-by-case basis a business in which only an employee holds the critical license rather than the socially and economically disadvantaged owner. All other core qualifications must be met without issue and the owner must have a strong working knowledge of the field, enough to direct the person with the license.
Owners with a desk-only or office-only role in the business will not be considered as he or she must have the technical expertise to lead the external team. In these instances, it is critical that the business owner has a strong work history in the field. The way I generally explain it to clients is: If someone called in sick, could the socially and economically disadvantaged owner take their place? These types of individuals, though not always on the sites, are the types of owners that the certifying agencies like the SBA are looking to approve.
Main Advantages of This Certification
Once certified, you will be eligible to attend specialized business training and counseling sessions. It’s a huge added bonus to your current business model. You will also be able to avail marketing assistance and multiple executive development programs that have been provided by the SBA and their resource partners.
An 8(a) business is also eligible to receive sole source contracts, going up to $6.5 million for manufacturing and $4 million for goods and services. In addition to the above, any 8(a) certified business can also form various joint ventures and teams in order to bid on contracts. Also on sba loans with special loans program. This will enhance your ability to not only successfully compete for but also execute larger prime contracts.
Licensed professional consultants can both help and guide you through the whole application process. Once certified, you can utilize your certification to bid for multiple government contracts either in an individual capacity or with the help of your fellow certificate holding businesses.
By having a better understanding of the 8(a) certification process, its benefits and requirements, you should be able to determine if your small business would qualify for this extremely beneficial certification. Please contact BizCentral USA to assist you in preparing the 8(a) certification and we will prove to be a valuable asset for years to come.