How to Determine your Primary NAICS Code

What is a NAICS code?

A NAICS code is a series of numbers (up to six digits) that establishes a specific business activity by the Federal Government.

Your primary NAICS code is the six digit code that represents the largest segment of your business’s revenues earned within its most recently completed fiscal year.

How can I determine what my primary NAICS Code is?

You can use the search feature at www.census.gov/naics. Within the “2007 NAICS Search” box, enter a keyword that describes the services provided by your business. A list of primary business activities containing that keyword and the corresponding NAICS codes will appear. Choose the one that most closely corresponds to your primary business activity, or refine your search to obtain other choices.

The following are two examples:

1. If you are a business in which your largest segment of revenue earned in its most recently completed fiscal year was as a software developer, your primary six digit NAICS code would be 541511.

2. If you are a business in which your largest segment of revenue earned in its most recently completed fiscal year was in commercial construction, your primary six digit NAICS code would be 236220.

What is the purpose of establishing a primary NAICS within my 8(a) Application?

1. It represents to the SBA what your primary business activity is (e.g. what your business does). It is important to note, that your supporting documentation such as the copies of contracts/invoices showing the scope of work performed will backup your establishment of your primary NAICS code.

2. Once you establish your primary NAICS code, the SBA will review your last two years of contracts and taxes to determine if you have earned the largest segment of your revenues within this NAICS code and if the revenues are deemed to be sufficient to meet the two years in business requirement. If you have not earned the largest segment of revenues within your primary NAICS code for two consecutive years, you will not meet the potential for success criteria established by the SBA unless you seek a two year waiver.

3. Finally, it establishes your SBA size standard limit. You must be classified as a small business concern to participate within the 8(a) Program. You can view more information on size standards at www.sba.gov/content/guide-size-standards

Can you have more than one primary NAICS code?

No. You can only have one primary NAICS code. However, you can multiple secondary NAICS codes listed within your SAM (System for Award Management) or DSBS (Dynamic Small Business Search) profile.

For more information on the SBA 8(a) Program, visit cloveer.com

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SBA 8(a) Certification Requirements

Though there is much more to 8a certification than meeting a few simple criteria, there are in fact some basic requirements that must be met to consider applying. If you are ready to begin the 8a application process, you will need to organize a lot of information. We at Cloveer know this can be daunting, so we’ve compiled an 8a certification checklist to help you make sure you’re on the right track. Take a look at this 8a checklist to see if you meet the basic eligibility requirements to qualify to apply for the 8a certification.

  • Are you a U.S. citizen?
  • Do you work full-time in the business without any outside employment?
  • Do you hold the top management position of the business?
  • Are you the highest compensated individual within the business?
  • Do you have an adjusted net worth of less than $250,000?
  • Did you as the applicant make less than $250,000 averaged over the last three tax years?
  • If licenses are required to operate your business, do you hold them?
  • Are you not currently on probation or parole, if you have ever been arrested?
  • Has the business been operating with revenues for 2 full years as shown on its last two tax returns?
  • Have you or your business satisfied any unpaid, federal, state or local obligations?
  • Do you own at least 51% of the business which is applying?
  • Does the business that is applying exhibit potential for success?
  • Does the business earn 70% of its revenue from more than one client?
  • Would you be a first time participant in the SBA 8a program?
  • Do you own a small business?

If you answered “Yes” to each of the questions on the above 8a certification checklist, congratulations; you meet the basic requirements for 8a qualification. The next step in your 8a application is compiling your actual application documentation. As there is quite a bit of paperwork involved in this part of the application.

For our clients who are too busy running their businesses to complete the application themselves, we understand you don’t have time to look over the 8a checklist and that you would rather have a group of trusted 8a program experts more involved in your application. Cloveer offers other services including an 8a Application Review, and for those who would like their entire 8a application completed and approved in record time, a full 8a Application Completion Service.

No matter which option you choose, Cloveer guarantees that no other company will work harder or faster to assist you in getting your business SBA 8a certified. We have been assisting clients to obtain their 8a certification and maintain their 8a program eligibility for over 10 years. As such, we know the SBA 8a program regulatory requirements, 8a standard operating procedures and Office of Hearings and Appeal cases that affect the 8a program better than 99.9% of anyone else out there.

At Cloveer, we believe in treating you the way we want to be treated. We go the extra mile to make sure your experience with our company is outstanding. Contact us today to discover what Cloveer can do for you.

Do you meet the SBA 8(a) Program Economic Disadvantage Qualifications?

Do you meet the SBA 8(a) Program Economic Disadvantage Qualifications?

One of the many requirements to become SBA 8a Certified is to be deemed to be economically disadvantaged at the time of your 8a Application submission. In order to meet this requirement you must:

1. The applicant(s) for 8a Certification  must have an adjusted net worth of less than $250,000 at the time of their application submission.

Adjusted Net Worth = Personal Assets – Liabilities – [Equity in primary residence + ownership interest in business + IRA/Other Retirement Accounts subject to a penalty for early withdrawal]. All assets jointly held are split 50/50. If you are unsure what you Adjusted Net Worth is, use the Cloveer Adjusted Net Worth Calculator  to determine if you are below the $250K limit. The online calculator offers specific advice and tips on determining some of the required amounts that must be  reported to the SBA.

Tip: You will be required to submit supporting statements for all assets and liabilities so make sure that you provide amounts that can be corroborated by the SBA.

There  may be ways to reduce your adjusted net worth below the regulatory limit.  Please contact us for specific advice on your situation.

2. The applicant(s) for 8a Certification cannot have more than $4,000,000 in total assets at the time of their application submission.

Total Assets = All Personal assets – IRA/Other Retirement Accounts subject to a penalty for early withdrawal.

3. The applicant(s) for 8a Certification cannot have an Adjusted Gross Income (AGI) of more than $250,000, averaged over the last three tax years.

AGI = Your total income – any federal taxes you paid on behalf of the corporation or LLC (from distributions taken) – any income attributed to your corporation or LLC  that is not distributed to you and essentially re-invested in the corporation or LLC.

If you are unsure if you meet this eligibility requirement, please contact us for a detailed review.

4. The applicant(s) for 8a Certification must be able to produce a narrative statement of economic disadvantage that details at least one specific instance of actual or perceived prejudice or bias that can be directly attributed back to their distinguishing feature (Race, Ethnicity, Culture, Handicap, Gender, etc).

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. If you are not a member of one of the SBA designated groups, you still must submit a Social Disadvantage Narrative though

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.

View our sample economic and social narratives of disadvantage. They are actual narratives that have been approved by the SBA. The names have been changed to protect the identity of the individuals but will give you a good idea of the level of specificity that must be provided with your narrative.