Obtaining your 8(a) Certification is a complex process. The documentation required for the application usually runs in the thousands of pages and the 8(a) Certification is the most rigorous application process of any government certification. That does not mean the process is impossible, however, 75% of firms experience rejection in the 8(a) Application process.

There are five major requirements for a firm to become 8(a) certified. The owners of the firm must be Socially Disadvantaged and Economically Disadvantaged. The firm must have the potential to successfully complete federal contracts. The firm must be free of any control issues keeping the primary owner from having full control of the business, and the owner must be of high moral character.

To prove Social Disadvantage, 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, to gain approval the SBA will require a narrative to demonstrate this status. Native Americans that have a tribal card are also eligible.

Women and Service-Disabled Veterans can apply to the SBA’s 8(a) BD Program, however, a compelling case demonstrating how they have suffered from discrimination is a requirement for these individuals.

Tip 1:  People with Heritage from the Iberian Peninsula meaning Spain and Portugal are considered Hispanic for proving social disadvantage. The allowance of this group of people is not common with other minority-owned business certifications.

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

Tip 3:  Native Alaskans and Hawaiians often overlook their socially disadvantage status, however they are eligible for the 8(a) BD Program as presumed applicants.

Tip 4:  The Social Disadvantaged Individual or group of individuals need to own 51% or more of the firm to qualify. Therefore 50.5% would be an ineligible ownership percentage.

To prove you are Economically Disadvantaged the owner of the firm cannot have made more than $450,000 per year on average for the previous 3 years.

The owners 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 in income that rolls onto an individual’s taxes does not count towards the $450,000 in net income if the money is returned to the firm’s bank account in the form of retained earnings, or the funds paid in taxes on those retained earnings.

Tip 2:  If an individual has money totaling more than the $850,000, they can paydown their mortgage on their primary residence, and in some cases, this can get them under the $850,000 threshold.

Tip 3:  The SBA will pull a credit report on the applicant with the purpose of looking for assets that applicants have not disclosed to the SBA. Therefore, it is critical that you disclose all assets to the SBA, or your credit report could create an automatic denial.

To prove your firm has the Potential for Success in 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 they have filed two tax returns. However, there is a two-year waiver in which the firm can still apply.

Not more than 70% of the firm’s revenue can come from one single source. This is analyzed by the SBA 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 business can be obtained provided the firm meet all other 8(a) qualifications. They have 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 where the firm becomes compliant with the 8(a) 70% rule and can apply for 8(a). This seems counterintuitive, but it can provide a firm with a brief window when they can gain approval.

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

To show that there are not any control issues present, the owner of the firm must be the one managing the day-to-day operations, 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 a 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.

To demonstrate the owner of the firm has good moral and ethical considerations, the owner of the firm must be free of moral and ethical problems.

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

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

I hope these tips have been valuable for you. For the five to six hundred firms that obtain their 8(a) Certification each year, this certification represents the opportunity of a lifetime.

If you have interest in exploring your firm’s qualifications and potential in the federal marketplace utilizing the SBA’s 8(a) Certification, I always recommend contacting an industry expert such as ez8a or Advance 8a. Neither charge for an initial consultation.