8(a) firms are permitted 9 years in the 8(a) BD Program. This generally creates a juggling act for small businesses in determining when they should apply. If you apply too early, your firm might not be able to handle federal contracts, apply too late, and the owner may no longer be considered economically disadvantaged. This juggling act has changed in the current environment. What I am telling everyone is to apply now if you can. The following reasons show why.

Current Rationale: COVID-19 / Recession

A Potential for Success Argument must be made to the SBA in order to obtain the 8(a) Certification. One of those requirements is that the firm must have been profitable on its last tax return. In the current economic conditions, even firms that are still doing well should be concerned by this requirement. Firms that show a profit on their 2019 tax return, that would like to have access to selling to the federal government as part of their COVID-19 business continuation, may struggle to show a profit on the 2020 return. Firms that wait until they file their 2020 tax return may lose this much needed opportunity.

Historical Rationale of When to Apply for 8(a)

Waiting to Apply Advantages:

1. Firm has more time to potentially be awarded a Federal Contract. Having prior federal contracting experience, which provides past performance, as well as federal buyer contacts, can greatly reduce the amount of time it takes in landing your firm’s first 8(a) contract.

2. Larger firms can take on bigger initial contracts than a smaller firm. The SBA must approve all sole-source contracts that are awarded to an 8(a) firm, and the larger the firm, the more the SBA will be willing to approve.

3. An older firm typically has more financial capital available. Therefore, it can spend resources on hiring dedicated federal business development staff, or consultants that can aid in quickly ramping up the firm’s federal business.

Waiting to Apply Disadvantages:

1. An owner of an 8(a) firm must be classified as economically disadvantaged by the SBA in order to have their application approved. This requirement is that the owner of the firm has personally made less than $250,000 per year on average over the past three years (with some exclusions), and his or her personal net-worth must be less than $250,000 (with some exclusions). The larger a firm becomes, the more likely the owner will exceed one or both of these boundaries, and no longer be considered eligible for an 8(a) Certification.

2. 70% Rule – The SBA has a requirement for businesses that not more than 70% of a firm’s revenue can come from a single source, wanting to see some level of diversity in their customer base, unless the single largest customer is the Federal Government. Recently, the SBA has taken a more relaxed position for newer firms, typically those applying for a 2-year waiver, and the SBA will waive this requirement, in some cases. Therefore, a firm with an adverse weighting of their customer base could lose its ability to apply for 8(a) by waiting too long.

3. Complacency sets in for many firms and waiting to apply means that it does not go to the forefront, and the firm can miss out on a major business accelerator opportunity.

If you would like to review your firm’s current set of circumstances, examining whether or not now would be good time to apply for 8(a), I always recommend contacting an industry expert such as ez8a. They do not charge for an initial consultation.