How to qualify for the 8(a) Program if you have been in business for less than 2 years.

Your business must possess reasonable prospects for success in competing in the private sector if admitted to the 8(a) program.

To do so, it must be in business in its primary industry classification (NAICS code) for at least two full years (24 months) immediately prior to the date of its 8(a) application and be able to provide business tax returns for each of the two previous tax years that show sufficient operating revenues earned within the primary industry (NAICS code) in which the applicant is seeking 8(a) certification for.

The SBA may waive the two years in business requirement if each of the following five conditions can be met:

Condition 1: The individual or individuals upon whom eligibility is based have substantial business management experience.

  • Provide resumes for the 8(a) Applicant(s) showing past employment history that exhibit significant management experience such as:
    • Being previously employed performing management duties (CEO, VP, CFO, President, Director).
    • Showing you successfully operated a similar business concern in the past and/or managing projects and employees to at least the equivalent size of the contracts and number of employees that the applicant business is working on currently.
  • In addition, the applicant and other key individuals of the business concern must also have the required technical capabilities, if required in your business situation. The applicant must hold all requisite licenses (Contractors, Professional Engineer, Accountant, etc.) and professional certifications within firms who have been in business for less than two years.
  • If you only have 1-3 years of business management experience you may not meet the substantial business management experience required by the SBA.

Condition 2: The applicant has demonstrated technical experience to carry out its business plan with a substantial likelihood for success if admitted to the 8(a) BD program.

  • Provide evidence of a business plan or some semblance of a business plan that:
    • Details your Marketing/Sales, Products/Services, Management/Organizational/Personnel and Finance goals and demonstrated progress towards the goals you specified.
    • Outlines any unique or special technical expertise that you and your team have and how you believe it will sustain your business during its early formative years.
  • Provide copies of independent reference letters from your active and completed clients, directly addressed to the applicant, that establish successful contract performance.

Condition 3: The applicant has adequate capital to sustain the operations and carry out its business plan as a participant.

  • Your business must have sufficient working capital available. Sufficient working capital is generally defined as a minimum of 3 months’ worth of working capital immediately available to your business.
  • Provide your most recent business bank account (s) statements that support that you have 3 times your monthly burn rate.
  • In lieu of cash in your business bank account, a business line of credit may be substituted. In this case, you will need to provide a copy of the business line of credit documents and a current statement showing the availability of enough working capital.
  • You should also describe your general payment terms and what actions your business takes to expedite the timely collection of receivables including how fast you typically receive payments from invoices.

Condition 4: The applicant has a record of successful performance on contracts from governmental or nongovernmental sources in its primary industry category.

  • Provide at least one business tax return showing approximately $100,000 to $150,000 in gross receipts. The business tax return provided must be the most recently filed year with the IRS (2018). If your most recently filed business tax return (2018) shows none or less than $100,000 you will most likely not be able to seek a waiver.
  • Be able to display to the SBA that your business is not economically dependent on one client for more than 70% of your revenues from its inception. This means that your breakdown of contracts must show you are earning revenues from multiple entities, within the primary NAICS code you are seeking 8(a) Certification for and show that not more than 70% of the total revenue earned was with one single entity. The 70% rule does not apply if your direct billable client is a federal, state or local government agency.
  • Provide copies of all paid invoices and bank statements showing the depositing of all revenue earned that matches the business financial statements provided to the SBA.
  • If you have a potential federal client that may want to procure your products or services, should you become 8(a) certified, you should attempt to obtain and provide noncommittal letters of reference as additional evidence.
  • In addition, the SBA may require proof that the government previously procured and is likely to procure the types of products or services offered by your business. Proof can be provided in the form of FBO.GOV or FPDS.GOV printouts of previous 8(a) procurement’s that have occurred and are similar in nature to your products or services offered by your business.

Condition 5: The applicant has, or can demonstrate its ability to timely obtain, the personnel, facilities, equipment, and any other requirements needed to perform contracts as a Participant.

  • You must have all required personnel needed for your current contract requirements. You should detail the current number of employees you have, any future hiring of personnel required and how you will recruit and attract additional employees including timelines for hiring and any special relationship that exist with recruiters, personnel agencies and temporary agencies. You must also be able to show the SBA that you meet the 8(a) subcontracting requirements. See CFR §125.6 for what are the prime contractor’s limitations on subcontracting for the specific percentages.
  • For facilities requirements you should detail your current office space, any future locations or expansions, how you will lease or purchase new office space including any relationships that exist with local commercial real estate brokers.
  • For equipment requirements you should detail your current equipment owned or leased that is needed to perform on contracts, any future equipment needed along with where you will lease or purchase and how you will finance or lease the equipment needed.
  • If bonding is required, you will need to provide a letter from your surety company stating your single and aggregate amount of bonding available.

Cloveer offers a 8(a) Length of Time (Two Year) Waiver Guide and Sample for sale and immediate download through our site for $150.00. Our two year waiver guide and sample explains and shows you how to properly address all five (5) required areas.

What information will need to be provided with your 8(a) Application.

Keep in mind that each 8(a) Application is unique and document requirements vary for each 8(a) Application.

Below is a general list of items that will need to be included within your 8(a) application. Your unique application may require additional items not specified below.

  • Signed 1040 personal tax returns (last three filing years) including all schedules, attachments, W-2’s, 1099’s and proof of payment for any tax owed for each 8(a) Applicant and their spouse.
  • Signed business federal tax returns including all schedules and attachments for the last three filing years, or as many as you have been in business, if less than 3 years. Proof of payment for any tax owed may be required, if applicable.
  • Balance Sheet, Income Statement, A/P and A/R aging statements no older than 30 days old for the current year to date. Please note, your financial statements must be prepared either on an income tax basis or be GAAP compliant.
  • Balance Sheet, Income Statement, A/P and A/R aging statements for the last three completed fiscal years.
  • resume for each 8(a) Applicant and any other key officer, employee, director or 10% or more owner.
  • A detailed listing of all clients broken down by revenue earned for the last 12 months and possibly for the last three years.
  • A current certificate of good standing (required for Corporations and LLC’s only).
  • Stock certificates/Stock ledger (Corp), Membership Certificates/ledger(LLC).
  • Articles of Incorporation/Organization/Partnership filing/DBA Filing.
  • Foreign Organization Filings and associated Certificates of Good Standing (If applicable).
  • Articles of Conversion/Buy-Sell Agreements, Voting Agreements (if applicable).
  • Bylaws, Operating Agreement or Partnership Agreement.
  • Stockholder/Board or Member Meeting minutes (Most Recent).
  • Proof of US Citizenship (if required).
  • Business bank signature cards.
  • Copies of all business and special licenses.
  • Copies of any business loan agreements.
  • A copy of the current lease agreement for business.
  • A current personal financial statement and supporting statements for  the following: (Checking/Savings, IRAs with terms and conditions, Life Insurance (Cash Surrender only), Stocks/Bonds, Mortgage, Deeds, Fair Market Value for Real Estate, Home Owners Insurance Policy, Any Other Assets (Boats, RV’s, Motorcycle, Other Business Ownership, etc.), Automobile Title/Registration and associated loans, Credit Cards, Home equity or any other Loan Agreements (Student, etc.).

8(a) Certification – Contract Listing Report, Copies of Contracts and Letters of Reference

When you apply for the SBA 8(a) Program the SBA will require that you provide a detailed listing of your contracts* for the current year, through the most recently completed month, and at least the last two years along with 2 -3 letters of reference from current or past clients. You may also have to provide the SBA a copy of your client contracts for the last 12 calendar months.

*The term contract means contract, agreement, PO, etc.

The contract listing breakdown. You must detail the following to the SBA:
1. Contract Name. List the name of the contract, if applicable. (e.g., DISA Contract)
2. NAICS Code. List the six digit NAICS code which you are performing the work under. (e.g., 541511)
3. Award Date. List the date the contract was awarded (e.g., 01/01/2015)
4. Customer Name (Billable Client). List the name of the customer/client you are billing for the work being performed. (e.g. Lockheed Martin)
5. Description. Provide a brief description of the work being performed for the client. (e.g., Web based software application for DISA)
6. Total Dollar Value of Contract. List the total value of the contract. (e.g. $100,000 or TBD, ongoing if no total value)
7. Revenue earned from Client. List the amount of revenue your company has earned from this client in the current year to date and the last two fiscal years. (e.g., $53,275)

See below for a example.

sample contract listing

Sample Contract Listing

You must also prepare another breakdown for the last 12 calendar months of your revenue too. See Below for an example.

Last 12 Months of Contracts

Last 12 Months of Contracts

The SBA will also use the above breakdown’s to look at your economic dependency over these periods of measurement to see if you are or have been earning more than than 70% of your revenue from one billable client. See our blog posting on economic dependency for more information on this topic.

Reference Letters:
As stated above the SBA will also require 2-3 letters of reference from current or past clients that speak to your performance on the work performed. The letters should be on the letter writers letterhead, provide a brief description of the work performed and whether it was performed successfully, and also contain the letter writers contact information and signature.

Copies of Contracts:
Although not specified by the SBA in their 8(a) Application checklist you should gather and store electronic copies of all contracts, agreements, PO’s, etc between your firm and the client for the last 12 months as you have reported within the last 12 months of contracts/revenue breakdown. Be sure that all documents are duly signed by all parties, if the SBA requests this information from you.

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 cloveer.com to discover what Cloveer can do for you.

 

Certificate of Good Standing. Where to obtain one for my 8(a) Application or HUBZone Application.

When applying for the 8(a) Program or HUBZone Program you are required to provide the SBA with a copy of a current Certificate of Good Standing that is no older than 90 days old when your application is submitted. Some States refer to the the Certificate of Good Standing as a Certificate of Existence, Compliance, Status or Authorization. Below is a links to obtain this required document.

Alabama

Referred to as a Certificate of Existence
Link to obtain: https://www.alabamainteractive.org/sos_eCertificate/welcome.action

Alaska
Referred to as a Certificate of Compliance
Link to obtain: https://www.commerce.alaska.gov/web/cbpl/corporations/certificateofcompliance.aspx

Arizona

Referred to as a Certificate of Good Standing
Link to obtain: http://www.azcc.gov/Divisions/Corporations/CertGoodStanding.asp

Arkansas

Referred to as a Certificate of Good Standing
Link to obtain: https://www.ark.org/sos/good_standing/index.php

California

Referred to as a Certificate of Good Standing
Link to obtain: http://www.sos.ca.gov/business-programs/business-entities/information-requests/

Colorado

Referred to as a Certificate of Good Standing
Link to obtain: https://www.sos.state.co.us/biz/BusinessFunctions.do

Connecticut

Referred to as a Certificate of Legal Existence
Link to obtain: http://www.concord-sots.ct.gov/CONCORD/online?eid=7000&sn=ColeOnline

Delaware

Referred to as a Certificate of Status
Link to obtain: https://corp.delaware.gov/directweb.shtml

District of Columbia (DC)

Referred to as a Certificate of Status
Link to obtain: https://dcra.dc.gov/book/corporate-registration-faqs/corporate-registration-faqs-process

Florida

Referred to as a Certificate of Status
Link to obtain: http://dos.myflorida.com/sunbiz/manage-business/certification/

Georgia

Referred to as a Certificate Existence
Link to obtain: https://ecorp.sos.ga.gov/CertificateOfExistence

Hawaii

Referred to as a Certificate of Good Standing
Link to obtain: https://portal.ehawaii.gov/home/online-services/certificate-of-goods-standing/

Idaho

Referred to as a Certificate of Good Existence
Link to obtain: https://sos.idaho.gov/CORP/certificate_of_existence.html

Illinois

Referred to as a Certificate of Good Standing
Link to obtain: https://www.ilsos.gov/corporatellc/

Indiana

Referred to as a Certificate of Existence
Link to obtain: https://inbiz.in.gov/business-filings/information-requests

Iowa

Referred to as a Certificate of Existence
Link to obtain: https://sos.iowa.gov/business/FormsAndFees.html#CertsAndCopies

Kansas

Referred to as a Certificate of Good Standing
Link to obtain: https://www.kssos.org/other/certificate_good_standing.html

Kentucky

Referred to as a Certificate of Existence
Link to obtain: http://www.sos.ky.gov/bus/businessrecords/Pages/default.aspx

Louisiana

Referred to as a Certificate of Good Standing
Link to obtain: http://www.sos.la.gov/BusinessServices/SearchForLouisianaBusinessFilings/OrderDocumentsAndCertificates/Pages/default.aspx

Maine

Referred to as a Certificate of Existence
Link to obtain: https://icrs.informe.org/nei-sos-icrs/ICRS

Maryland

Referred to as a Certificate of Status
Link to obtain: http://dat.maryland.gov/businesses/Pages/Internet-Certificate-of-Status.aspx

Massachusetts

Referred to as a Certificate of Good Standing
Link to obtain: https://mtc.dor.state.ma.us/mtc/_/

Michigan

Referred to as a Certificate of Good Standing
Link to obtain: http://www.michigan.gov/sos/0,4670,7-127-5647_12539_71074-33117–,00.html

Minnesota

Referred to as a Certificate of Status
Link to obtain: http://www.sos.state.mn.us/business-liens/business-help/how-to-order-copies-of-filings-certificates/

Mississippi

Referred to as a Certificate of Status/Good Standing/Existence
Link to obtain: http://www.sos.ms.gov/BusinessServices/Pages/Order-Documents.aspx

Missouri

Referred to as a Certificate of Good Standing
Link to obtain: https://www.sos.mo.gov/business/formsAndServices

Montana

Referred to as a Certificate of Existence
Link to obtain: https://sos.mt.gov/business

Nebraska

Referred to as a Certificate of Good Standing
Link to obtain: http://www.sos.ne.gov/business/corp_serv/

Nevada

Referred to as a Certificate of Good Standing
Link to obtain: http://nvsos.gov/sos/businesses/commercial-recordings/faqs#59

New Hampshire

Referred to as a Certificate of Good Standing
Link to obtain: http://sos.nh.gov/corpfaq.aspx

New Jersey

Referred to as a Certificate of Standing
Link to obtain: http://www.state.nj.us/treasury/revenue/dcr/programs/ann_rptdue.shtml

New Mexico

Referred to as a Certificate of Good Standing
Link to obtain: http://www.sos.state.nm.us/Business_Services/good-standing-and-status-certificate-information-and-fees.aspx

New York

Referred to as a Certificate of Status
Link to obtain: https://www.dos.ny.gov/corps/faq_certificates_under_seal.page.asp

North Carolina

Referred to as a Certificate of Good Standing
Link to obtain: http://www.dor.state.nc.us/taxes/corporate/lettergoodstanding.html

North Dakota

Referred to as a Certificate of Good Standing
Link to obtain: https://sos.nd.gov/business/business-services/business-services-faqs

Ohio

Referred to as a Certificate of Good Standing
Link to obtain: https://cogs.sos.state.oh.us/(S(2g3njebc2opd3omrdqi4crki))/index.aspx

Oklahoma

Referred to as a Certificate of Good Standing
Link to obtain: https://www.sos.ok.gov/corp/order/orderDefault.aspx

Oregon

Referred to as a Certificate of Existence
Link to obtain: http://sos.oregon.gov/business/Pages/business-registry-certificates.aspx

Pennsylvania

Referred to as a Certificate of Good Standing
Link to obtain: http://www.dos.pa.gov/Businesscharities/Business/Resources/Pages/Good-Standing-Or-Subsistence-Certificates.aspx

Rhode Island

Referred to as a Certificate of Good Standing
Link to obtain: http://sos.ri.gov/divisions/Business-Portal/Certifications-Apostille-Goodstanding

South Carolina

Referred to as a Certificate of Existence
Link to obtain: https://web.sc.gov/SOSDocumentRetrieval/Welcome.aspx

South Dakota

Referred to as a Certificate of Good Standing
Link to obtain: https://sdsos.gov/business-services/corporations/request-certificate-good-standing.aspx

Tennessee

Referred to as a Certificate of Existence
Link to obtain: http://sos.tn.gov/products/business-services/request-certificate-existence-0

Texas

Referred to as a Certificate of Status/Existence
Link to obtain: https://www.sos.texas.gov/corp/copies.shtml

Utah

Referred to as a Certificate of Existence/Good Standing
Link to obtain: https://corporations.utah.gov/inetcorpdocs.html#Existence

Vermont

Referred to as a Certificate of Good Standing
Link to obtain: https://www.sec.state.vt.us/corporationsbusiness-services/good-standing-status-certificates.aspx

Virginia

Referred to as a Certificate of Good Standing/Existence
Link to obtain: https://www.scc.virginia.gov/clk/copy.aspx

Washington

Referred to as a Certificate of Existence/Authorization
Link to obtain: https://www.sos.wa.gov/corps/OrderDocs.aspx

West Virginia

Referred to as a Certificate of Existence/Authorization
Link to obtain: http://www.sos.wv.gov/business-licensing/business/Pages/copiesandcertificates.aspx

Wisconsin

Referred to as a Certificate of Status
Link to obtain: https://www.wdfi.org/corporations/fees/cert_program_inst.htm

Wyoming

Referred to as a Certificate of Good Standing
Link to obtain: https://wyobiz.wy.gov/business/viewcertificate.aspx

 

8(a) Certification and Community Property Laws

§124.104   Who is economically disadvantaged?

(2) When married, an individual claiming economic disadvantage must submit separate financial information for his or her spouse, unless the individual and the spouse are legally separated. SBA will consider a spouse’s financial situation in determining an individual’s access to credit and capital where the spouse has a role in the business (e.g., an officer, employee or director) or has lent money to, provided credit support to, or guaranteed a loan of the business. SBA does not take into consideration community property laws when determining economic disadvantage.

This means that both the applicant (individual claiming disadvantage) and his or her spouse must submit a separate SBA 413 Form during the 8(a) Application process, unless:

They are legally separated.

and;

The SBA will not split all assets and liabilities 50/50 unless they are jointly owned or there is a pre and/or post nuptial agreement that details which assets are held by one individual or another, separately.

§124.105   What does it mean to be unconditionally owned by one or more disadvantaged individuals?

(k) Community property laws given effect. In determining ownership interests when an owner resides in any of the community property states or territories of the United States (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington and Wisconsin), SBA considers applicable state community property laws. If only one spouse claims disadvantaged status, that spouse’s ownership interest will be considered unconditionally held only to the extent it is vested by the community property laws. A transfer or relinquishment of interest by the non-disadvantaged spouse may be necessary in some cases to establish eligibility.

This means that the applicant (individual claiming disadvantage) and their spouse must execute a community property transmutation agreement to ensure that they have transferred or relinquished the proper percentage of ownership held within the applicant firm so that the applicant has unconditional ownership of the applicant firm that is applying for the 8(a) Program.

If you need a template to prepare an acceptable Community Property Transmutation Agreement, please visit our shop that contains a template for purchase.

 

8(a) Certification Tip – Your primary NAICS code and what’s reported on the business tax returns.

When you apply for the SBA 8(a) Program you must report to the SBA what your primary NAICS (North American Industry Classification System) code is.

Your primary NAICS code is defined as the six digit code in which your business earned its largest segment of revenue, in the most recently completed fiscal year. To get 8(a) certified you typically must have earned your largest segment of revenue in your primary NAICS code for at least the last two fiscal years. If your business has not earned the largest segment of revenue in the primary NAICS code reported to the SBA for the last two fiscal years you will need to apply with a 2 year waiver.

To determine the primary NAICS code for your business you can visit our blog post titled “How to Determine your Primary NAICS Code” for detailed instructions.

The primary NAICS code for your business must also match what is reported on your business tax returns otherwise the SBA will assume that the business does not meet the two years in business requirement.

If your primary NAICS code is different that what is reported on your filed business tax returns, and the NAICS code reported on the business tax returns is incorrect you must:

Submit a letter of explanation to SBA, as part of your 8(a) Application, from your CPA or tax preparer regarding the business activity code and service listed on the filed business tax returns vs what NAICS code that should have been reported on them. This letter will save you 15-30 days of processing by the SBA.

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 cloveer.com to discover what Cloveer can do for you.

Stock Certificates and Ledger Guide: What you need to provide and tips for compliance.

Our 2019 Stock/Membership and Ledger Guide will assist in the preparation and 100% completion of your Stock or Membership Certificates and Ledger for your SBA 8(a) Application. This downloadable guide is $150.00. Click on the Buy Now button below to purchase the guide and download now. This guide will not only show you how to properly prepare your Stock/Membership Certificates and Ledger but will save you countless hours of trying to figure out how to be compliant with these SBA 8(a) application requirements and possible endless back and forth or long delays of the processing of your 8(a) application by the SBA. The guide includes the following information:

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2017-07-03_13-13-46

  • Who needs to provide Stock/Membership Certificates and Ledger within the SBA 8(a) Application documentation.

Detailed tips for compliance including:

  • What to do if you have never prepared the required Stock/Membership Certificates and ledger in the past.
  • How to ensure they are completed properly so they correspond with the ownership information presented to the SBA.
  • What to do if you have lost any previous issued  Stock/Membership Certificates.
  • How to properly complete every area of the Stock/Membership Certificates and Ledger  to alleviate any questions by the SBA.