Applying for 8(a) status has become easier particularly with the Sept. 13 introduction of an on-line application that the U.S. Small Business Administration designed to be simpler and cheaper. The process is now 100% Web-based allowing applicants to apply without downloading any software or plug-ins and replacing a four-page written application that required substantial supporting documentation.
Kenneth Q. Lujan branch manager for the U.S. Small Business Administration on Guam said he is excited about introducing the 8(a)/Small Disadvantaged Business electronic application which he sees as a faster way to get certified. “We hope that this process will revolutionize the way the Business Development Program office oversees 8(a) and Small Disadvantaged Business certification and that the process will prove to be a more streamlined user-friendly and easier method for the applicant to apply for certification.”
The 8(a) business development program is named for a section of the Small Business Act and was created to help small disadvantaged businesses compete in the American economy and access the federal procurement market.
Application to the program begins by contacting the Small Business Administration district office serving the area. Frequently 8(a) orientation workshops are held to provide additional information regarding the eligibility requirements and to review various SBA forms.
The basic requirements an 8(a) applicant firm must meet are: It is a small business; it is unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States; and it must demonstrate potential for success.
SBA defines a small business as one that is independently owned and operated is organized for profit and is not dominant in its field. Depending on the industry size standard eligibility is based on the average number of employees for the preceding 12 months or on sales volume averaged over a three-year period.
Lujan said that typically businesses that apply with his office fall into one of seven categories which includes: services retailing general and heavy construction wholesaling manufacturing special trade construction and agriculture. “Each category has specific requirements as to the allowed maximum number of employees and annual monetary ceiling receipts which we assist to determine eligibility.”
Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as members of a group. Social disadvantage must stem from circumstances beyond their control.
Lujan said while the list of persons qualifying is extensive those with origins from Guam the Northern Mariana Islands Palau the Federated States of Micronesia the Marshall Islands the Philippines Japan China Korea Hong Kong and other groups designated by the SBA can qualify.
Even people who are not members of a designated group can establish social disadvantage on the basis of a “preponderance of evidence” which leads the SBA to objectively conclude that that social disadvantage is evident.
Lujan said those who meet the social disadvantaged definition are individuals whose ability to compete in the free-enterprise system has been impaired due to diminished capital and credit opportunities. “A person’s net worth after excluding equity in the business and in the primary residence may not exceed $250 000 ” Lujan said.
SBA also considers the person’s average two-year income fair market value of all assets access to credit and capital and the financial condition of the applicant firm in evaluating economic disadvantage. This can include objective consideration of the current state of local economic conditions.
SBA requires that socially and economically disadvantaged individuals directly and unconditionally own 51% of the applicant firm. Applicant firms must have been operational for at least two full years in the primary industry in which they are seeking 8(a) program certification. A firm can still apply for participation in the 8(a) program by obtaining a waiver if it has substantial business management experience and can demonstrate technical experience to carry out its business plan with a substantial likelihood for success. Additional conditions are adequate capital to sustain operations and carry out a business plan a record of successful performance on contracts from public or private sources and the ability to obtain the personnel facilities equipment and any other requirements needed to perform contracts.
An important area of consideration in determining eligibility is that the applicant and all the business principals must demonstrate good character Lujan told the Journal. “Each applicant firm and its principals are reviewed to ensure that good moral character and business integrity are shown. Disqualifications can result from evidence that the firm knowingly submitted false information during the application process and for other reasons including past criminal convictions.”
The application process and a final decision regarding 8(a) program eligibility is made within 90 days after SBA’s determination that the application is complete. If it is declined each applicant has the right to request reconsideration within 45 days after receiving notice that the application was declined. “The applicant has the burden of overcoming each reason cited in the administration’s decision to decline the application ” Lujan said.
Once approved program participation is divided into two stages; the developmental stage and the transitional stage. Jasper “Jack” Corbett business opportunity specialist in Guam for the SBA said that the developmental stage is four years and the transitional stage is five years. “The developmental stage is designed to help 8(a) certified firms overcome their economic disadvantage by providing business development assistance. The transitional stage is designed to help participants overcome the remaining elements of economic disadvantage and to prepare participants for leaving the 8(a) program.”
Participating businesses are required to annually submit several key certifications that they meet program eligibility requirements. “These certifications must state that there have been no changed circumstances which could adversely affect the participants program eligibility. Each owner must submit personal financial information and a record from each business principal claiming disadvantaged status regarding the transfer of assets for less than fair market value to any immediate family member or to a trust in which an immediate family member is a beneficiary within two years of the date of the annual review ” Lujan said. “That includes a record of all payments compensation and distributions made by the participant to each of its owners officers directors or to any person or entity affiliated with such persons and copies of all tax forms.”
Failure to provide all required documents or certifications is cause for termination from the 8(a) program. Lujan said that while on Guam termination for good cause rarely occurs it can happen if a pattern of failure to make required submissions or responses to SBA in a timely manner within 30 days of request is ignored. “There is a list of reasons for termination that all participants must be aware of.”
For more information visit the SBA Web site at http://www.sba.gov. MBJ
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