Proposed Changes to SBA 8(a) Program Can Help Your Business

Monday November 2, 2009

The Small Business Administration has announced proposed changes to strengthen its 8(a) business development program to benefit disadvantaged small businesses. The 8(a) program allows these disadvantaged businesses to compete more easily for business, particularly with the federal government.

How Does This Program Help My Small Business?
If you can qualify as a disadvantaged business, you can become eligible for SBA assistance in obtaining government contracts, which can provide long-term growth for your company.

How Do I Qualify as a Disadvantaged Business?
Your business must first qualify as a "small" business, according to its size relative to other businesses in your industry. Then you must be either:

Socially disadvantaged: a member of a disadvantaged group (subject to racial or ethnic prejudice or cultural bias because of your membership in the group) , or

Economically disadvantaged: socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities. You must have a personal net worth less than $250,000 (excluding your primary residence and the equity in your business), and a product or service regularly purchased by the federal government.

The qualification process also includes a review of the composition of your board of directors to be sure the board is controlled by individuals who are socially or economically disadvantaged.

If you think you may be able to qualify as a disadvantaged business, contact your local SBA office.

What Changes are Proposed in the 8(a) Program?
The SBA proposed changes are the result of the first comprehensive review of the 8(a) program in a number of years. Among the proposed changes:

•   Joint Ventures - qualifying that 8(a) firms are required to perform a significant portion of the work to ensure that these companies are able to build capacity;
•   Economic Disadvantage - providing more clarification on economic disadvantage as it relates to total assets, gross income, retirement accounts and a spouse of an 8(a) company owner in determining the owner's access to capital and credit;
•   Mentor-Protégé Program - requiring that assistance provided through the Mentor-Protégé relationship is directly tied to the protégé firm's business plan;
•   Ownership and Control Requirements - providing flexibility in admitting individuals of immediate family members of current and former 8(a) participants;
•   Tribally-Owned Firms - seeking public comments on the best way to determine whether a tribe meets the criteria of being economically disadvantaged for the 8(a) program;
•   Excessive Withdrawals - amending regulations on what is considered excessive as a basis for termination or early graduation from the 8(a) program;
and
•   Business Size for Primary Industry - requiring that a firm's size status remain small for its primary industry code during its participation in the 8(a) program.