When applying for the 8(a) Certification, a company that has been in business for less than two years will need to obtain a waiver from the SBA. For the purposes of this rule, the SBA considers a firm's starting point to be the date when the firm first began generating revenue, rather than the date of incorporation. The SBA does not consider a change in entity type, such as a sole proprietorship becoming an LLC, to be an event that affects this eligibility clock, so there is no additional time in business required for making this change. However, if the firm goes a full year without revenue, the firm's two years in business calendar is reset for SBA 8(a) purposes.

Quick Acid Test

A Quick Acid Test can determine whether your company is eligible for a two-year waiver in a matter of minutes. All other requirements for 8(a), such as the ability to demonstrate both social and economic disadvantage, must be met by your firm, but these four quick questions will determine whether you should go more in depth with your waiver discovery process.

If you meet the four criteria below and all other requirements for 8(a), your firm is highly likely to be granted a two-year waiver.

1. The firm has at least one (and its’ most recent) tax return with revenue and a profit.
2. The firm has a positive net worth.
3. The owner of the firm works full-time for the business (meaning Monday-Friday 9am-5pm)
4. The firm has at least $150,000 in revenue since the firm’s inception.

*If you meet these four criteria, discussing the specifics of your particular situation is the most logical next step.

When Applying with a Two-Year Waiver can be an Advantage

Some businesses may find it advantageous to apply early and take advantage of the two-year waiver. This is due to the SBA frequently waiving the 70% rule for firms that apply early. On a rolling 12-month basis, this means that no more than 70% of the firm's revenue can come from a single source. As a result, if your firm only has one client, applying early with a two-year waiver may be your best strategy for obtaining 8(a) in the shortest amount of time.

Two-Year Waiver Scenarios

A two-year waiver is not needed in the following situation:

If your company has not been in business for two years on the date of your 8(a) application, but has filed two tax returns, you will not need a two-year waiver. This means that even if you only filed a return for one month of your first year in business, the SBA will consider it a "full year of business" and will not require a two-year waiver if there is some revenue on the initial return.

A two-year waiver Is not needed in the following situation:

If you have only filed one tax return for your business and the fiscal year is coming to an end. The SBA will no longer require a two-year waiver after March 15th of the following year. The SBA will then require your most recent completed business tax return. If the extension is granted, the SBA will consider you to have been in business for two years and will base their analysis on your year-end financial statements to determine that you have had business revenue for two full years.

A two-year waiver is required:

If from the date of your company’s inception you have not been in business for a full two-years, but you have two years of filed tax returns, but your first return was simply for expenses but did not have any reported revenue. The SBA does not view your firm as having been in business for two years. This is because the SBA only considers tax returns for its year count that have actual revenue reported on them. 

A two-year waiver is required:

If your company has been in operation for several years but there has been a gap in tax returns reporting revenue, you will most likely need to apply for a two-year waiver. For example, if you completed a return reporting revenue in the most recent calendar year but had no revenue to report the year before, even if you had several years of returns prior to that revenue gap year, the SBA would still require a waiver because the SBA requires two consecutive years of the firm earning revenue.

Industry Experts Such as ez8a and Advance 8a have Two Service Options

They have two service options for the two-year waiver. The first is the waiver, and the second is a strategy session for firms that are not yet ready to apply for a waiver.

The two-year waiver is included in their full service 8(a) Application Package; thus, most clients do not require the two-year waiver service when applying with us for 8(a). This service is available as an add-on to the 8(a) Application Review Service and as a standalone service. This SBA waiver is used by approximately 20% of clients using the 8(a) Full-Service Application Package, so it is important to note that 8(a) firms are approved every day using this waiver. Many of these firms that received 8(a) waivers did so after first using the Future 8(a) Planning Strategy Service. This provided these firms with the necessary planning to ensure that they set up their businesses in such a way that they could obtain the 8(a) Certification in the shortest amount of time possible. If you need the 8(a) certification for your company quickly, we highly recommend this service. Both ez8a and Advance 8a do not charge for an initial consultation.