The 8(a) Business Development Program

A Small Business Administration program helping socially and economically disadvantaged entrepreneurs

10/25/2013

The 8(a) Business Development Program was started by the U.S. Small Business Administration (SBA) to support small businesses owned by economically and socially disadvantaged entrepreneurs. Not only does this program help disadvantaged individuals become successful entrepreneurs and enter mainstream American business, but it also acts as a stepping-stone to government subcontracting.
 
The SBA monitors 8(a) businesses through systematic evaluations, business planning and annual reviews. This oversight ensures that businesses taking part in the program are meeting the goals set by the SBA and are taking the appropriate steps toward competing successfully in the commercial market.
 
To this end, participating businesses must show that they are on the right track by maintaining a good balance between government and commercial business.
 
The SBA also encourages businesses to take part in the commercial market and not rely on government support by setting work caps on support, such as a “limit on the total dollar value of sole-source contracts that an individual participant can receive while in the program: $100 million or five times the value of its primary NAICS code.”
 
Aside from financial support and access to subcontracting opportunities, a mentoring program is also in place for new 8(a) companies to learn from experienced 8(a) mentors. This educational support is an important supplement to the financial help provided by the SBA, putting business owners in a position to learn from other disadvantaged entrepreneurs who have overcome similar obstacles.
 
Furthermore, 8(a) participants are eligible to receive counseling and marketing assistance and to take part in specialized business and high-level executive development training programs.
 
The 8(a) Business Development Program lasts for nine years and is split into two phases. The first is a four-year development phase, which is followed by a five-year transition stage. Participants are eligible for sole-source contracts up to $6.5 million for manufacturing and $4 million for goods and services. It is also possible to bid on contracts as part of a joint venture or team.
 
Entrepreneurs interested in this program must show the potential for success, have good character and prove that they are disadvantaged, by filling out the proper paperwork. Any small business wishing to apply for this program must be at least 51 percent owned by one or more individuals who are American citizens, whether by naturalization or by birth. The majority of the business (at least 51 percent) must also be managed and owned by individuals who meet the SBA’s standards for social and economical disadvantage.
 
“Under federal law, socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identification as members of groups without regard to their individual qualities,” states the SBA.
 
An individual can be considered socially disadvantaged if he or she is considered by others to be a member of a socially disadvantaged “presumed group” or considers himself or herself to be a member. Presumed groups include Native Americans, Black Americans, Hispanic Americans, Asian Pacific Americans and Subcontinent Asian Americans.
 
An individual not part of a presumed group can apply for socially disadvantaged status by proving to the SBA that he or she has a social disadvantage that has hindered the ability to enter into or advance in the business world. The proposed disadvantage must result from a distinguishing feature like gender, ethnic origin, race or handicap status. Potential disadvantage may also result from life experiences not common among the majority of Americans, such as isolated, longtime residence in an environment aside from mainstream American environments. If these identifying features or experiences resulted in chronic and substantial disadvantage in American society, then they can be used as evidence of social disadvantage.
 
If the SBA determines that an individual is socially disadvantaged, it will then determine whether there is a resulting economic disadvantage, by examining the financial status of the individual and, if applicable, the individual’s spouse. The previous three years’ income will be assessed to ensure that it does not average over $250,000. Net worth, assets and retirement funds will also be examined in order to determine that the individual does not have assets over $4 million or a net worth over $250,000. Information regarding how the SBA assesses these values can be found at http://www.sba.gov/content/economic-disadvantage-eligibility.
                                                                                                                    
“The application process is rigorous but with the right preparation and help from an SBA local office or resource partner, the firm will be able to submit a completed application package,” says the SBA.
 
Regardless of the time it takes to fill out an application, the overwhelming advantages provided by the program certainly make the effort worthwhile.
 
More information can be found at http://www.sba.gov/category/navigation-structure/contracting/contracting-support-small-businesses/8a-business-develop-0.

Related Blog Posts

Best Vans for Small Business

Plenty of new options help business get done for less Full story...

SCAM ALERT: There’s an app for that (but it might be fake)

by Ari Lazarus, Consumer Education Specialist, FTC Full story...

Critical Questions to Ask When Interviewing Job Applicants

Ask the right kinds of questions during interviews to find the most suitable employees for your business. Full story...