A list of 16 issues that prevent 8a applicant firm's from becoming 8a Certified.
Failure to spend the time to find out whether you fully qualify for 8a Certification can:
1. Result in a formal denial of your 8a application by the SBA. If this happens, you cannot re-apply for 12 months from the date you are denied.
2. Result in a seemingly endless 8a application review process at the SBA and cost your business concern the ability to bid on and win federal set-aside 8a contracts.
3. Cause you to spend 40+ hours putting together a bunch of paperwork that will result in nothing more than a paper weight.
Below are 16 of the 8a Application “Killers”. These will immediately tell you whether you have an issue that may prevent you from qualifying for 8a Certification.
1. The applicant (51% of more owner) must be a US Citizen when they apply.
2. The applicant must devote full time to the business concern that is applying for 8a Certification when they apply. This means that they must work at least 40 hours per week in the business concern without any outside employment.
3. The applicant must hold the highest management position within the business concern. Generally this is the CEO, President or Managing Member.
4. The applicant must be able to demonstrate that they are the highest compensated. Generally the SBA will deny your 8a application if you cannot demonstrate the applicant currently is the highest compensated or there is a very good reason why they have elected not to be.
5 The applicant must have an adjusted net worth of less than $250,000 at the time they apply. Adjusted net worth = Assets – liabilities – (Equity in primary residence + value of ownership interest in business concern).
6. The applicant’s AGI (Adjusted Gross Income) cannot be more than $200,000 averaged over the last two tax years.
7. The applicant must generally hold all licenses or professional certifications required to operate the business concern.
8. If the applicant has ownership in another business concern other than the business concern that is applying for 8a Certification the SBA will most likely determine that you do not devote full time and therefore deny your 8a application. There are ways to solve this issue and they vary depending on your unique condition.
9. The applicant cannot be on probation or parole. If the applicant has been arrested in the past it does not automatically deny them unless they were convicted of a specific crime. Having an arrest, regardless of how long ago, will severely delay the review of your 8a Application.
10. The business concern must have been in business for 2 full years. In addition, the last two years of its filed tax returns must show a reasonable amount of total sales. If it has not, you must seek a waiver and meet the 5 conditions set by the SBA to overcome this condition.
11. The business concern and the applicant cannot have any delinquent tax filings or have any unpaid Federal, State or local obligations at the time of application. This condition can be overcome by filing the proper extension for delinquent taxes or by providing evidence of a current re-payment arrangement for unpaid Federal, State or local obligations.
12. The business concern must be at least 51% directly owned by the applicant. The business concern must be a for-profit business and cannot be classified as a broker or be a subsidiary of another business concern.
13. The business concern’s current financial statements must exhibit positive net income, positive net equity and positive working capital at the time of application submission. The SBA requires that the business concern meets “Potential for Success”.
14. The business concern must not have earned more than 70% of its total revenue within the last 12 months with one single client. This does not apply to a business concern if its direct billing client is a Federal or State Government.
15. The applicant or business concern cannot have previously participated as an 8a participant. The applicant cannot have any immediate family members who are current participants in the 8(a) Program.
16. The business concern must be defined as a “Small Business” by the Federal Government. Your primary NAICS code, gross sales and sometimes the number of employees define your size standard that the SBA will base its determination on.
These are just 16 of the “Killers” that can potentially prevent your 8a Certification application from being successful. There are additional “Killers” and other areas that you should be concerned with prior to making the decision on whether you fully qualify for 8a Certification.
Spending the time upfront to ensure that your firm meets all of the eligibility requirements for 8a Certification can save you countless hours of frustration, the expense of putting the application together and the difference between obtaining formal 8a Certification or not.
