The 8(a) Certification has the strictest application requirements of all Federal Certifications. While 75% of businesses face first rejection, it does not imply that the endeavor is unrealistic; with a good application that satisfies all standards, your business can become 8(a) certified.

I've included important pointers for many of SBA's evaluation criteria below to help your company get 8(a) certified. Examine these areas, and don't hesitate to get in touch with an industry expert if you have any questions. They will be happy to go over the qualifications in further depth.

Socially Disadvantaged

Individuals with 100% of their blood heritage from a minority group that are also U.S. Citizens qualify. People with as low as 25% of their blood heritage from a minority group can also apply. However, for people in this category there is a required narrative. For Native Americans that have a tribal card, they are also eligible.

Women and Service-Disabled Veterans can apply. However, a compelling case must be documented by the applicant for either gender bias or discrimination against handicapped persons.

Tip 1: People with Heritage from the Iberian Peninsula (Spain/Portugal) are Hispanic proving a social disadvantage.

Tip 2: People from the Middle East and North Africa can successfully apply, however, they need a solid narrative.

Tip 3: Native Alaskans and Hawaiians often overlook their social disadvantage status.

Tip 4: A Socially Disadvantaged Individual or group of individuals needs to own 51% or more of the firm.

Economically Disadvantaged

The owner of the firm cannot have made more than $400,000 per year on average for the past 3 years.

The owner's net worth cannot exceed $850,000 excluding (a.) the owner’s primary residence, (b.) the business applying for 8(a), and (c.) the owner's retirement accounts.

The owners’ total assets cannot exceed $6.5 million excluding retirement accounts.

Tip 1: If your business is a sole proprietorship, partnership, LLC, or S Corp, the amount of money/income that rolls onto an individual’s taxes does not count towards the $400,000 in net income provided that the applicant deposits these funds into the firm as retained earnings. Funds also paid in taxes on those retained earnings are also excluded from the $400,000 calculation.

Tip 2: If an individual has a net worth over $850,000, A successful strategy can be that the applicant pays down the mortgage on their primary residence if this gets them under the $850,000 net worth threshold.  

Tip 3: The SBA will pull a credit report on the applicant to look for assets that have not been disclosed to the SBA. Therefore, make sure to disclose all assets.

Potential to Succeed at Federal Contracting

The owner of the firm must work full-time for the business, meaning Monday-Friday from 9am-5pm.

The firm must have made a profit on its most recent tax return.

The firm must have a positive net worth.

The firm must have been in business for two years, meaning having filed two tax returns. However, there is a two-year waiver that firms can apply for.

Not more than 70% of the firm’s revenue can come from a lone source. The SBA analyzes this on a rolling 12-month basis from the date of the 8(a) application.

Tip 1: Only the 51% owner of the firm needs to work full-time for the business.

Tip 2: A two-year waiver of time in business is permitted if the firm meets all other 8(a) qualifications and has at least $150,000 in revenue since the inception of the firm and a profit on the firm's most recent tax return. The firm must have at least one tax return.

Tip 3: If a firm has a long-standing client representing 100% of the firm’s business, and the firm loses this client and obtains another client which now has 100% of the firm’s work. There is often a point in time when the firm becomes compliant with the 8(a) 70% rule and can apply for 8(a).

Tip 4:  The SBA waives the 70% rule for firms applying for 8(a) with a two-year waiver.

Control Issues

The owner of the firm must be the one managing the day-to-day operations, and long-term strategic planning, and, in most cases, the most highly compensated person.

Tip 1: Not more than 25% of the firm’s revenue should come from a past employer.

Tip 2: The firm should not share employees, or office space with a past employer, or firm they have other dealings or entanglements. 

Tip 3: The owner of the firm should be the highest paid person at the firm, unless there is a strong and reasonable justification for this not being the case.

Moral/Ethical Considerations

The owner of the firm must be free of moral and ethical problems.

Tip 1:  The owner’s taxes should be paid up to date or have a payment plan in place with the IRS.

Tip 2:  Any misdemeanor or felony, regardless of how old, must be disclosed to the SBA. In most cases, the SBA disregards offenses that are more than 5-7 years old. Failure to disclose is never forgiven by the SBA. The SBA pulls an FBI background check on each applicant, and this will uncover any issues.

The owner of the firm must be free of moral and ethical problems.

Obtaining an 8(a) Certification can be a once-in-a-lifetime chance for small businesses. I recommend contacting an industry expert such as ez8a or Advance 8a with any questions you may have. They can assist you in deciding whether your company is eligible and will benefit from doing government contracting. Neither charge for an initial consultation.