In a recent SBA webinar, the SBA went over in great detail the top 10 most common reasons for denials of an 8(a) Application. While there are a lot of reasons why an application can be derailed, these are 10 examples of how an application, and goal of a quick admittance into the 8(a) Certification BD Program, can be snuffed out quickly.
1. Not submitting supporting documents – only submitting the SBA forms. According to the SBA, this happens daily.
2. Not providing corporate information – stock certificates, meeting minutes, etc.. Very small companies may not have these documents in place, however, they are required as part of the 8(a) Certification process.
3. Submitting incomplete tax returns – personal and business (and the firm’s affiliates’ tax returns, if requested).
4. Not submitting business financial statements – seemingly being under the impression that the tax returns are sufficient documentation.
5. Submitting financial statements that are unreliable and/or unclear.
6. Not devoting full-time devotion (hours) to the business.
7. Not providing any evidence to prove/claim social disadvantage, other than a one-line statement similar to this, “I am a disabled veteran” or “I am a woman-owned business in a male-dominated field.”
8. Showing control or the potential to control by non-disadvantaged individuals, or other affiliation issues.
9. Overtly obvious fronts for another business.
10. Not having satisfied federal tax obligations.
As consultants, we take calls every day from people that have been denied at some point during the 8(a) process. It is extremely important to apply with a complete and correct application the first time. This not only makes the 8(a) application easy for the SBA to process and approve, but also greatly reduces the risk of denial. If the SBA denies the 8(a) application, the firm must wait a full calendar year in order to reapply. Therefore, if 8(a) is part of your short-term business strategy, it is important to make sure there are no issues up to and including these 10 most common reasons for an application denial.