The 8(a) Certification can multiply a firm’s current revenue, making it extremely valuable for a small business. Therefore, it is important to pay attention to all of the details the SBA will be closely examining as part of the 8(a) application process.
The following list includes some of the more important details your firm should review BEFORE you submit your 8(a) application. Once you submit your application, even a simple change will undergo much greater scrutiny by the SBA, and can result in delay or denial of your 8(a) application.
a. Is the 51% owner of the firm listed as the highest position within the company?
b. Does the website show the skills and expertise of other members of the management team?
c. Does the website have a different address than the address being used on the 8(a) application?
d. Does the website present the firm in a professional manner?
a. Have you pulled your personal credit report lately?
b. The SBA will do so, they are mainly looking for undisclosed assets of the principal members.
c. Do you have any judgements or liens against you, SBA will decline you if you do.
Secretary of State Websites
a. Do you have other fictitious entities (corporations or limited partnerships, etc.) that exist but are not being used to conduct business?
b. Do any of these entities have a similar name or related purpose to the firm for which you are seeking to obtain 8(a)?
a. The name of the company and its principals should be searchable in Google.
b. There could be information on the web that either needs to be removed because it will mislead the SBA, or explained during the 8(a) application process.
You and your key employees’ LinkedIn profiles should match the resume you are submitting to the SBA.
a. Do not list references as part of your 8(a) application that you have not called and told what you are using them for.
b. The SBA has called our clients in the past, especially when an application is 50% or less of a presumed group, or their spouse works for them and applying for 8(a).
a. The real estate values you are listing in your personal financial statements should be vetted against Zillow.
b. If the Zillow values do not accurately reflect the value of the property more credible evidence will be needed as part of the 8(a) application.
a. The majority (51%+) owner’s resume should show experience in the industry in which the 8(a) application is being submitted.
b. A resume that is not credible and shows that the owner of the firm could not run the business can cause a denial of the 8(a) application by the SBA.
c. Make sure the duties show executive duties (customer development, policy monitoring and enhancement, procedural leadership).
d. Evaluate all key employees’ resumes for anything that could give the SBA cause to examine negative control from that employee for a more substantial technical background.
Contemplate Arrest Record
a. Often, applicants forget about a misdemeanor received decades ago, and mistakenly don’t disclose them during the 8(a) application process.
b. This can create a denial because the SBA will view this as an integrity issue.
c. The SBA runs an FBI background check on all applicants, so a failure to disclose will be caught by the SBA.
a. Language in Corporate Bylaws that relates to voting rights and company control needs to be reviewed.
b. If the bylaws are confusing, it is advisable to simplify them.
c. Keep in mind any bylaw that alters control of the firm from the 51% owner’s unconditional control could result in a denial.
a. The firm’s contracts with its customers should be reviewed and the owner of the firm should be the signer on all contracts.
b. If the owner is not signing these contracts, and a different individual has been delegated for that task, additional exploration will often be conducted by the SBA to determine if the contract signer is in control or is a crucial component to operate the firm.
The 51% owner of the firm in most cases should be the only signer on the account(s).
a. The lease should be in the name of the firm applying for the 8(a) Certification.
b. If the firm subleases space from another firm in the same industry, or another connection to the landlord exists, consider carefully whether or not this landlord can display control, or if there is an appearance of co-mingling of resources between the 8(a) applicant firm and another.
c. Expect the SBA will pay close attention to the business lease.
a. If the firm applying for 8a was purchased, and there was existing debt in place, there must not be recourse.
b. In addition, if a controlling interest was purchased from a past owner, that owner can no longer work at the firm, or this will generate a control issue if the purchase was in the last two years.
c. The transaction should have taken place at fair market value.
If you have additional questions concerning your firm’s eligibility and potential to become 8(a) certified, or would like help with the 8(a) application process, I always recommend contacting an industry expert such as ez8a or Advance 8a. Neither charge for an initial consultation.