8a Certification – The Economic Disadvantage Narrative Explained

Updated (August 29, 2016). As of August 24, 2016 you are no longer required to prepare and provide a Narrative Statement of Economic Disadvantage to the SBA as part of your 8(a) Application.

Here is the link to the Federal Register Rule that goes into effect on August 24, 2016 regarding the Narrative Statement of Economic Disadvantage.

https://www.federalregister.gov/articles/2016/07/25/2016-16399/small-business-mentor-protg-programs

Specifically, within it under item: 8(a) BD Application Processing (13 CFR 124.202, 124.203, 124.104(b), and 124.108(a))

In addition, SBA’s regulations provide that each individual claiming economic disadvantage must describe such economic disadvantage in a narrative statement, and must submit personal financial information to SBA. SBA believes that the written narrative on economic disadvantage is an unnecessary burden imposed on applicants to the 8(a) BD program. SBA’s determination as to whether an individual qualifies as economically disadvantaged is based solely on an analysis of objective financial data relating to the individual’s net worth, income and total assets. As such, this final rule eliminates the requirement that each individual claiming economic disadvantage must submit a narrative statement in support of his or her claim of economic disadvantage.

When you apply for SBA 8(a) Certification, the individual who is claiming disadvantaged status must be able to provide a narrative statement of economic disadvantage as just one of the many items to be included in their 8(a) Application.

I have spoken to countless clients who typically think this is the hardest part of their 8(a) Application and dread having to come up with, recall and reflect on how their ability to compete has been impaired due to discriminatory practices against them due to their identification as a member of their SBA designated group.

HERE IS A QUICK GUIDE TO ASSIST YOU TO UNDERSTAND WHAT THE ECONOMIC DISADVANTAGE NARRATIVE IS

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WHAT IS THE ECONOMIC DISADVANTAGE NARRATIVE:

The Economic Disadvantage Narrative is a series of statements where you describe, in detail, your personal experiences stemming from actual or perceived prejudice or bias you have experienced. These experiences must have been occurred in American Society.

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THE SIX AREAS:

There are six areas that the SBA requires that you consider when providing experiences of actual or perceived prejudice or bias that have affected your business life are:

1 – Bonding

2 – Credit or Financing

3 – Licenses

4 – Leases

5 -Market Restrictions

6 – Underemployment/Unemployment

Note – Some of these areas may or may not apply to your business life. If they do not, skip to the next area. Remember these important facts about what you are about to describe, (1) you must be able to describe at least one major negative experience to convince the SBA that you have subjected to unfair economic disadvantage, and (2), connect it back to your distinguishing feature, whether it is race, gender, ethnicity, handicap or culture.

The SBA will not accept the justification that you have been discriminated against because you are a small business and “can’t compete with the big guys” or your credit was not good enough to get a loan or line of credit.

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SOME QUESTIONS TO ASK YOURSELF WITHIN THE SIX AREAS:

Bonding:

1. Have you or your company ever been denied a performance or any other type of bond needed to acquire or perform your work?

2. Was the level of bonding that you have received less favorable in amount and terms than that of other similar companies who are not socially disadvantaged?

Credit or Financing:

1. Have you or your company ever been denied the required credit or financing needed to acquire necessary equipment, etc. or to finance the ongoing operations of your firm?

2. Were the terms (e.g. interest rate, collateral, etc.) of this financing less favorable than those received by similar companies who are not socially disadvantaged?

Licenses:

1. Have you or your company ever been denied a license required by you to conduct business?

2. Have you or your firm ever had a necessary license revoked?

Leases:

1. Has your firm ever been denied a real or tangible property lease?

2. Were the terms of your leases less favorable than those received by similar companies who are not socially disadvantaged?

Market Restrictions:

1. Have you or your firm ever been denied access to a client or to bidding on a contract opportunity?

2. Has your firm ever been rejected for a business opportunity on terms that were different than those provided to other similar firms that were not socially disadvantaged?

Underemployment/Unemployment:

1. Have you ever been denied employment or advancement opportunities that have had a negative impact on your economic situation?

2. Have you ever been discharged, fired or downsized on terms that were different than those provided to other equivalently qualified individuals?

____________________________________________________________________________________________________

If you answered YES to any of the questions above or have ever experienced any other form of perceived prejudice or bias in the areas above you will need to answer the questions below:

What were the dates or periods of time over which the above prejudice or bias occurred? (You must be as specific as possible (e.g. January, 2013, January through March, 2010, Fall of 2008, etc.)

Who are or were the person(s) and/or entities (i.e., organizations) involved and their respective positions or titles (You must be as specific as possible (e.g. first and last name, title, name of company. If you cannot remember exactly, please provide as much information as possible and state to the best of your recollection. Do not make up any names.)

Identify and describe the specific instances that you claim represent the substantial and chronic prejudice or bias you have identified above? Be very specific, using the “street language” that may have been used.

What specific actions are being taken or were taken by you to overcome the effects of the prejudice or bias experienced by you or your company? (e.g. filed lawsuit, threatened lawsuit, wrote letter/email requesting reasoning, etc.)

Identify and discuss the specific negative impact (economic, loss of professional development, damage to your personal or company reputation) on you and/or your firm on the entry or advancement in the business world because of this disadvantage experienced by you. (You must be as specific as possible, e.g.  the loss of revenue, profits or salary in actual dollar amounts.)

What type of physical evidence will you or can you provide to substantiate your claims of prejudice or bias? e.g. court or administrative findings, affidavits, documents related to rejected bonding, contemporaneous records memorializing meetings, conversations, negotiations, telephone calls,  a letter or two from a co-worker that observed the above incident)

What additional facts do you consider relevant to claiming and/or evidencing the prejudice or bias that you claim? (For example, were there other incidents involving others who may have been subjected to the same types of prejudice or bias as you, if so, be specific about the name of the company, individuals, titles, dates, things said/done, minority/non-minority, etc

For more information on the SBA 8(a) Program, visit cloveer.com or call 813-333-5800. Over 2,000 successful 8(a) Applications .

Do you qualify for the SBA 8(a) Program. Find out for Free!

Are you exploring the possibility of applying for the SBA 8(a) Program?

Don’t know where to start? The first step is to find out if you meet the very complex 8(a) Program eligibility requirements before you decide to take the leap into the 8(a) Application.

Cloveer has an online 8(a) eligibility questionnaire that will help determine your current state of 8(a) Program eligibility.

8(a) Eligbility Questionnaire

The questionnaire will take approximately 15 minutes to complete.

As you answer most of the questions, it will automatically inform you if you have a potential eligibility issue. Upon your submission we will review your responses and follow up to discuss your current state of 8(a) Program eligibility and answer any additional questions you might have.

8(a) eligibility questionnaire

Sample of Cloveer’s Online Questionnaire

Assuming you do qualify, If you would like assistance with your 8(a) Application, Cloveer can help.  With 15+ years and over 2,000 successful applications under our belt, we can assure you that no matter which option you choose, Cloveer will work harder and faster to get your business SBA 8a certified.  Contact us today at 813-333-5800 or visiting our website at www.cloveer.com to discover what Cloveer can do for you. We also offer these options for further assistance in completing your 8(a) Application.

Option 18(a) Application Accelerator

  • This interactive, web-based program is designed to guide you through the SBA 8(a) application process with ease.  The program takes you step-by-step through the creation and compilation of all the documentation necessary to submit your SBA 8(a) application. Moreover, it shows you how to organize your 8(a) application in the preferred SBA format.  As the nation’s #1 selling 8(a) application completion tool, we guarantee that no other program makes the process faster.

Option 28(a) Application Express Review

  • For those who wish to complete the application on their own, either using the 8(a) Application Accelerator or by other means, we offer an 8(a) Application Express Review service.  Here, one of our 8a program experts will review your entire application, checking it for missing documents and potential eligibility issues.  We will then advise you as to how best to modify your application to ensure it will be approved an SBA reviewer.

Option 38a Application Completion Service

  • The majority of our clients however, prefer a little more of a hands-on approach.  They recognize the expertise we have accumulated in the over 15 years we’ve been assisting clients obtain 8(a) certification, and want us to put it to use for them.  If you opt for our 8(a) Application Completion Service, we will work one-on-one with you to ensure that your 8(a) Application is 100% complete and compliant so the SBA can review and accept it the first time.

 

Tips to select the right consultant to prepare your 8a, HUBZone or VetBiz Application.

1. Pick up the phone. Call them and speak to the actual person who will be preparing your application. 

You should be able to call them and speak directly to the individual(s) who will be responsible for preparing your application. At Cloveer, you can call and speak to the employee who will be responsible for preparing your application. They will answer any of your questions and let you know whether or not you are eligible to become certified into one of these programs at no cost. Call us at 813-333-5800 to get your questions answered.

2. Don’t choose your consultant solely on their price for services.

The old adage is true. You get what you pay for. If it looks to good too be true, it usually is.

3. Stay away from any consultant that offers you any type of guarantee.

The FAR prohibits any federal consultant to base any fee for their services contingent on certification.

4. Ask as many questions up front as possible. See if they actually know the rules and regulations of the program you want to get certified into. They should be able to answer your eligibility questions quickly and correctly.

Cloveer pre-qualifies all of its potential clients to make sure they meet all of the regulatory requirements.

5. Check the consultants Better Business Bureau report.

If they don’t have a profile established with the BBB, or have negative feedback, this is a sign of potential problems. Cloveer is an A+ Rated BBB business with zero complaints.

6. Ask them for references you can personally speak to and look for a recent track record of success.

Cloveer has real references that are published on our website that you can call and speak to.

7. Look at their website to see if they provide more than just sales information.

Cloveer.com has an extensive FAQ section along with a comprehensive blog on getting certified. We want you to understand as much as possible before making a decision on whether or not to pursue certification.

8.  Make sure that the agreement provided for services to be rendered covers everything.

All services provided by Cloveer are on a fixed price basis so there will be no hidden charges.

For More information on getting your 8a Certified, HUBZone Certified or VETBiz Certified, call us at 813-333-5800 or visit www.cloveer.com

 

Top 5 States with SBA HUBZone Businesses

There are 5,313 active SBA HUBZone Application firms as of October 2015. Below is an infographic showing the location by state and number of active SBA HUBZone Certified firms. The source of this information is the SBA Dynamic Small Business database.

HUBZone MAP

HUBZone MAP

The top five states with HUBZone Certified Firms are:
1. California – 481
2. Virginia – 371
3. Oklahoma – 300
4. Texas – 261
5. Maryland – 237

The top five states with the lowest number of HUBZone Certified firms are:
1. Delaware – 3
2. Rhode Island – 7
3. Vermont – 11
4. Connecticut – 14
5. Maine – 15

This information is provided by Cloveer.com.

Cloveer provides products and services on the SBA 8(a), HUBZone, and VA VetBiz programs.

Financial Statements – 35 Items the SBA reviews when applying for 8(a) Certification

When applying for the 8(a) Program you are required to submit the following financial statements for the business:

  1. Year to date Balance sheet and income statements, no older than 90 days, including a detailed A/P and A/R aging statement if you are operating on an accrual basis.

2. The last three years of Balance sheet and income statements (e.g. 2014, 2013, & 2012)

You should ensure that all financials provided are prepared on generally accepted accounting principles or an accepted cash basis.

Tip: do not submit your financials on a different basis than what your taxes were filed.

What does the SBA reviewer look for when they review these:
*Note* The following items are taken from the current SBA SOP.

1. Are the current year to date financials no older than 90 days from date of receipt by the SBA?

2. Are the aging schedules for A/P and A/R consistent with with the year to date balance sheet?

3. Are any A/P or A/R more than 90 days old?

4. Do the balance sheets balance?

5. Are current assets recorded properly?

6. If the business is a dealer, wholesaler, or supplier, does the firm maintain any inventory?

7. Does the firm have fixed assets? If so, are these fixed assets recorded properly?

8. Are the fixed assets reported with depreciation or at actual value?

9. Do the firm’s fixed assets correspond with its type of business? For example, if the firm performs construction work does it have construction equipment?

10. If there is a partner shareholder or officer loan, is there a copy of the loan document? Is this loan reflected on the individual’s SBA Form 413, Personal Financial Statement?

11. Are there loans or notes receivable from a shareholder, officer or partner?

12. Has a copy of the loan or note been provided?

13. Does the loan reflect generally accepted repayment terms? If not, is this item over-inflating the firm’s assets?

14. Does the firm have the ability to service debts?

15. Are there any loans that are questionable or that may raise concerns regarding control?

16. Do retained earnings reconcile with previous financial statements?

17. Does the listed business equity match that reported on the Personal Financial Statements of the owners?

18. Is the profit and loss statement correctly calculated?

19. Does the profit and loss statement show revenues in the appropriate business activity?

20. Is “Cost of Goods Sold” included?

21. Are the line items properly recorded?

22. If there is an expense for salaries for employees, are employees listed on SBA Form 1010?

23. If there is an expense for workmen’s compensation, are employees listed on SBA Form 1010?

24. Is the disadvantaged individual the firm’s highest compensated officer or employee? If not, has an explanation of the salary structure been provided?

25. Are there any large subcontracting expenses that appear questionable?

26. Does the firm appear to be in compliance with the percentage of work requirements for its primary business?

27. Does the firm appear to have the necessary equipment, financial resources, working capital, etc., to perform 8(a) contracts it may be awarded?

28. Are there questionable items listed on the statements, or have things changed significantly from the previous year end statement?

29. Are there indications that excessive withdrawals have occurred?

30. Does the firm have financing by non-disadvantaged individual(s) that would be considered critical financing? Also, is the loan payable upon demand?

31. Are there any significant changes in any categories that create a concern? For example, have loans disappeared?

32. What pattern are the revenues, profits, and losses showing? Is there a need to ask for clarification, such as an explanation of the reason for a downward trend or sudden revenue drop?

33. Are there any discrepancies between the firm’s tax returns and the statements? Are these discrepancies based on cash versus accrual? If not, is reconciliation required? Does taking into consideration cash versus accrual reconcile the accounts?

34. Do the balance sheets correspond with the tax return schedules? For example, are there shareholder loans on the tax return schedules that are not reflected on the financial statements?

35. Do the statements and corresponding tax returns reflect any conversions from accrual to cash accounting?

Need assistance with your 8(a) Application? Call us at 813-333-5800 or visit www.cloveer.com for more information.

8(a) Application – Contracts, Invoices and Letters of Reference – What you need to know and provide

Among the many items that are required to be submitted to the SBA, with your 8(a) Application, you will need to supply a listing of client work performed, copies of contracts/agreements, invoices and letters of reference.

These items will allow the SBA to determine:
1. If you have any economic dependence issues.
2. That your primary NAICS code identified within your 8(a) application submission is correct.3. Who is signing or has signed the contracts/agreements within your organization to determine if any unconditional control issues may exist or if there is someone else that, not identified, may be a considered a key officer/employee.
4. If you are performing on these contracts to the satisfaction of your clients.

Client Listings Worksheet:
You must supply the SBA with a detailed listings of all work performed by your business for the following periods:
a. Beginning of current year through the most recently completed month end.
b. The last three years.
c. Breakdown of all contracts/revenues earned within the last 12 months.

The client listings worksheet provided to the SBA should contain the following information:
a. NAICS Code for work performed
b. Award date of contract/agreement
c. Customer name (billable client)d. Brief description of work performed for client.
e.Total dollar value of contract/agreement
f. Revenue earned in each period specified above. You should separate out the revenue for the current year, and each of the last three years individually for each client.

Contracts/Agreements:
You must supply the SBA with a copy of all contracts/agreements and invoices earned within the last 12 months. Make sure that all contracts are signed by all parties and contain all pages.

The SBA will examine these contracts to determine if the primary NAICS code indicated is correct and also to see if someone other than the applicant is signing and executing these contracts on behalf of your company.

Invoices:
You must supply the SBA with all invoices, for work performed, that matches the totals within your client listings worksheet.

These invoices should show the work performed and be descriptive enough to give the SBA reviewer an idea of the type of work performed, that was billed.

Letters of Reference:
You must supply the SBA with at least 2-3 letters of reference from clients listed within your client listings worksheet. These letters of reference should generally speak to the type of work performed, how well it was performed and must be provided on the letter writers letterhead, signed and contain their contact information.

Need assistance with your 8(a) Application?

With 15+ years and over 2,000 successful applications under our belt, we can assure you that no matter which option you choose, Cloveer will work harder and faster to get your business SBA 8a certified.  Contact us today at 813-333-5800 or visiting our website at www.cloveer.com to discover what Cloveer can do for you. We also offer these options for further assistance in completing your 8(a) Application.

Option 18(a) Application Accelerator Tool

  • This interactive, web-based program is designed to guide you through the SBA 8(a) application process with ease.  The program takes you step-by-step through the creation and compilation of all the documentation necessary to submit your SBA 8(a) application. Moreover, it shows you how to organize your 8(a) application in the preferred SBA format.  As the nation’s #1 selling 8(a) application completion tool, we guarantee that no other program makes the process faster.

Option 28(a) Application Review

  • For those who wish to complete the application on their own, either using the 8(a) Application Accelerator or by other means, we offer an 8(a) Application Review service.  Here, one of our 8a program experts will review your entire application, checking it for missing documents and potential eligibility issues.  We will then advise you as to how best to modify your application to ensure it will be approved an SBA reviewer.

Option 38a Application Completion Service

  • The majority of our clients however, prefer a little more of a hands-on approach.  They recognize the expertise we have accumulated in the over 14 years we’ve been assisting clients obtain 8(a) certification, and want us to put it to use for them.  If you opt for our 8(a) Application Completion Service, we will work one-on-one with you to ensure that your 8(a) Application is 100% complete and compliant so the SBA can review and accept it the first time.