How to get 8(a) Certified if your firm has been in business for less than two years.

The SBA may waive the 2 year requirement if you meet each of the following conditions:

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

In order to prove that the applicant and other key individuals of the business concern meet this condition, the individual or individuals resumes and past employment history must exhibit significant management experience either;

a. previously employed performing management duties (VP, CFO, President, Director) with a firm that operated in the primary industry or NAICS code  that the business concern is seeking 8(a) Certification for, or;

b. has owned and operating a similar business concern in the past.

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 also hold all requisite licenses and professional certifications within a firm who have been in business for less than two years.

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.

In order to prove that you meet this condition, you must provide evidence of a business plan or some semblance of a business plan that:

a. Details your Marketing/Sales, Products/Services, Management/Organizational/Personnel and Finance goals and demonstrated progress towards the goals you specified.

b. 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.

You must also provide copies of independent reference letters from your 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.

In order to prove you meet this condition, your business must have sufficient working capital. Sufficient working capital is usually defined as a minimum of 3 months worth of liquid working capital immediately available. Your business bank account (s) statements must show that you have 3 times your monthly burn rate, at a minimum. In lieu of cash, a business line of credit may be substituted.

You should also describe your general payment terms and what actions your business takes to expedite the timely collection of receivables.

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

In order to prove you meet this condition you must provide proof of a minimum of at least two completed contracts showing operating revenues earned in the primary industry (NAICS code) in which it is seeking 8(a) Certification. The contracts must meet the following minimum conditions:

a. Show that you billed and received a minimum of $50,000 – $100,000. You must have at least one tax return filed for the business that shows revenue earned in the primary NAICS code. This being said, you cannot apply for the waiver if your business just started up and has not filed a tax return yet.

b. The contracts must be with different entities and show that not more than 70% of the total operating revenue earned is with one single entity. The 70% rule does not apply if your direct billable client is a federal, state or local government agency.

Copies of all paid invoices and business bank account statements to support the operating revenue earned and collected from the contracts will need to be provided.

If you have a potential federal client that may want to procure your products or services, should you become 8(a) certified, you should provide letters of noncommittal 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 procurements that have occurred and are similar in nature to your products or services offered

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.

In order to prove you meet this condition you must provide an explanation of current and future personnel requirements, facilities and equipment.

For personnel requirements you should detail the current number of employees you have, any future hiring 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.

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 you want more information on becoming 8(a) Certified, please visit http://www.cloveer.com/8aprogram.html or call us at 813-333-5800.

Do you meet the 70% Economic Dependency Rule?

Economic Dependence is a significant obstacle to the eligibility of many applicants desiring to gain 8(a) Certification for their firms. In fact, it is currently the issue for which we have to turn the greatest number of potential applicants away, until the issue is resolved.

Here is a simple flow chart that will help you determine if economic dependency applies to your business. Click on the chart below to see a larger image.

Economic Dependency Chart

Economic Dependency Chart

Need assistance with your 8(a) Application? With 14 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 Review

  • For those who wish to complete the application on their own 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 28a 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.

 

Active SBA 8(a) Certified Firms as of July 1, 2014 by Location

There are 7,078 active SBA 8(a) Certified firms as of July 1, 2014. Below is an info graphic showing the location by state and number of active SBA 8(a) Certified firms. The source of this information is the SBA Dynamic Small Business database.

8(a) Certified Firms as of July 1, 2014

8(a) Certified Firms as of July 1, 2014

The top five states with 8(a) Certified Firms are:
1. Virginia – 880
2. California – 789
3. Maryland – 668
4. Texas – 605
5. Florida – 441

The top five states or US territories with the lowest number of 8(a) Certified firms are:
1. Vermont – 2
2. U.S. Virgin Islands – 3
3. Rhode Island – 7
4. Delaware – 9
5. North Dakota  – 10

This information is provided by Cloveer.com.

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

Have additional Questions? or want to get started on your SBA 8(a) Application?

With 14 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 Review

  • For those who wish to complete the application on their own 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 28a 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.

 

8(a) Program. Ownership vs. Control

Control is not the same as ownership. For example a disadvantaged individual may own 51% of the business that is applying for 8(a) Certification but they may be found to not unconditionally control the company by the SBA.

As defined by the SBA in CFR 124.106, the SBA regards control as including both the strategic policy setting exercised by boards of directors and the day-to-day management and administration of business operations of the business.

In order to be found to control the business, here are the following requirements.

1. The disadvantaged individual must manage the daily business operations (Except for concerns owned by Indian tribes, ANC’s, NHO’s or CDC’s)

2. The disadvantaged individual must have managerial experience of the extent and complexity to run the business.

3. The disadvantaged individual need not have the technical expertise or possess the required license to be found to control the business if he or she can demonstrate that he or she has ultimate managerial control over those who possess the required license or technical expertise. However – where a critical license is held by a non-disadvantaged individual have an equity interest in the business, the non-disadvantaged individual may be found to control the business.

4. The disadvantaged individual must work full-time in the business, without any outside employment. In addition, the disadvantaged individual must devote full-time during the the normal working hours of the business. If the disadvantaged individual works in a wholly owned subsidiary of the business this full-time devotion may be considered to meet the requirement of full-time devotion.

5. The disadvantaged individual must hold the highest officer position in the business. (Usually President or CEO)

6. The disadvantaged individual must be physically located in the USA.

7. If the business is a partnership, the disadvantaged individual must serve as the the general partner with control over all partnership decisions.

8. If the business is a limited liability company, the disadvantaged individual must serve as management members with control over all decisions of the LLC.

9. If the business is a corporation, the disadvantaged individual must control the Board of Directors. See CFR 124.106 for Board of Director Control requirements.

10. No non-disadvantaged individual or immediate family member may be a former employer or principal of any disadvantaged individual, unless the relationship between the former employer or principal and the disadvantaged individual does not give the former employer actual control or the potential to control the business and such relationship is in the best interest of the business.

11. The disadvantaged individual must be the highest compensated individual.

12. Non-disadvantaged individuals who transfer the majority ownership or control of the firm to an immediate family member, within two years prior to the 8(a) Application and remain involved in the firm are presumed to control the firm.

13. The disadvantaged individual must be a guarantor of any critical financing or bond, if required.

14. Business relationships that exist with non-disadvantaged individuals or entities which cause economic dependence will cause a control issue.

Have additional Questions? or want to get started on your SBA 8(a) Application?

With 14 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 Review

  • For those who wish to complete the application on their own 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 28a 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.

 

 

 

List of Items needed to complete the SBA Form 413 (Personal Financial Statement)

The following is a detailed list of items needed to complete the SBA Form 413 (Personal Financial Statement.

Please note, this list may or may not cover every personal asset or liability you may have and should serve as only a general list.

All statements mentioned below must be no older than 30 days old when submitted to the SBA, contain all pages of the statement, list all of the account holder(s) names, account numbers, type(s) of account and account balances.

Assets:
1. Checking account statement.
2. Savings account statement.
3. IRA and any other retirement account statements along with a complete copy of the written terms and conditions for each retirement account held.
4. Copies of any shareholder/member promissory notes or personal loans owed to you.
5. Life insurance statement for any life insurance account that has a cash surrender value only, showing the cash surrender value, the face amount of the policy, name of insurance company and any beneficiaries.
6. Stocks, mutual funds and savings bonds statements. You will need to identify the number of shares owned, name of security, cost, market value quotation/exchange and date of statement.
7. Current balance sheet and income statement for the applicant business.
8. Type of real estate/property owned (e.g., primary residence, investment, vacation property, etc) along with address, date purchased, original cost, present market value (see #10), full name and address of mortgage holder, mortgage account number, mortgage balance (see #5 under liabilities), amount of payment and status of mortgage (e.g. current, delinquent, etc.)
9. Deed for each property owned.
10. Fair market valuation for each property owned.
11. Homeowners insurance policy for each property owned.
12. KBB value for each automobile owned
13. Title or registration for each automobile owned
14. A estimate of the value of your “Other Personal Property” along with a detailed listings of the contents.
15. Other Assets (Examples below):
– Other businesses owned (Current balance sheet and income statement)
– Boats (NADA value)
– Motorcycles (NADA value)

Liabilities:
1. Notes payable to banks such as HELOC, 2nd mortgage, Student loans, personal loans, shareholder/member loans, etc. (Full copy of original loan agreement along with a current statement). Additionally, you will need to identify the original balance for each note, the current balance, payment amount, frequency, how secured and whom the note is with.
2. Automobile loan statement(s)
3. Credit card statement(s). Include even if $0 balance, when submitted.
4. Statement of loan balance for any loan taken on life insurance.
5. Mortgage statement for each property owned.
6. If past taxes are owed, a current balance statement showing balance owed. Additionally, you will need to identify the type of taxes owed, to whom payable, when due and amount.
7. Any other liabilities such as boat, motorcycle, loan statement(s), etc.

Source of Income:
1. An amount for your current annual salary
2. An amount for any Net Investment income you may earn in the current year.
3. An amount for any real estate income you may earn on properties you own.
4. An amount for any any other income such as VA disability income, distributions, dividends or bonuses, etc.

Need assistance with your 8(a) Application? With 14 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 Review
  • For those who wish to complete the application on their own 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 28a 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.

 

 

10 Resume Tips for SBA 8(a) Applicants

Every individual claiming disadvantage status, as well as each officer, director, partner, member, key employee or holder of 10% or more ownership interest in the firm applying for the 8(a) Program must submit a detailed personal resume.

Here are 10 important tips to make sure these individual’s resume contain all information required by the SBA.

1. Make sure that all employment information on the resume matches any W-2 Forms submitted with your 8(a) Application.

2. Explain any gaps in employment. If previously unemployed, state that for the gap of employment on the resume. All gaps of employment, regardless, must be explained.

3. Ensure the resume clearly outlines the respective title of the individual and corresponds with all other pertinent information contained with the 8(a) Application. Examples (all 8(a) electronic application forms, organizational chart, contracts, taxes, etc.)

4. Fully explain all current and past employment management duties and responsibilities. Not just technical duties. and responsibilities.

5. Provide a listing of all formal and informal education, courses and professional licenses or certifications. Including any major study areas in which may be applicable to your primary industry you are seeking 8(a) Certification for

6. Note any past ownership in any other business. This includes ownership in a business for holding real estate.

7. Ensure that resume for the individual claiming disadvantage status is the highest ranking officer and notes that they run the day to day operations of the business.

8. Ensure that the resume for anyone other the individual claiming disadvantage status does not indicate that they can cause negative control with the applicant firm.

9. If anyone received a W-2 from any source, other than the applicant firm, in the most recent tax year, provide a letter from each employer indicating their final date of employment to prove full time devotion.

10. Check the resumes one last time before submitting to make sure items 1-9 above have been completed.

Need assistance with your 8(a) Application? With 14 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 Review

  • For those who wish to complete the application on their own 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 28a 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.

 

Do you qualify for the SBA 8(a) Program?

There are many eligibility criteria that a small business must meet to qualify for the SBA 8(a) Program. We have developed a free online 8(a) eligibility questionnaire that anyone can use to see if their business meets the 8(a) eligibility criteria.

http://www.cloveer.com/8aquestionnaire.html Screenshot

Cloveer.com 8a Program Eligibility Questionnaire

This free online 8(a) Certification Eligibility Questionnaire should generally be completed by the individual who primary 8(a) Program Eligibility will be based upon.

The questionnaire will take approximately 10-15 minutes to complete and as you answer most of the questions, it will automatically inform you if you have a potential eligibility issue.

If you find that you do qualify, we have three 8(a) Application Completion options:

Option 18(a) Application Review

  • For those who wish to complete the application on their own 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 28a 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.

With 14 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 to discover what Cloveer can do for you.

Top Five States with SBA 8(a) Certified Firms

Update: As of May 2014, the number has dropped to 7,277. See below for April Data. This is a drop of 23 8(a) certified participants since April.

There are 7,300 active SBA 8(a) Certified firms as of April 2014. Below is an info graphic showing the location by state and number of active SBA 8(a) Certified firms. The source of this information is the SBA Dynamic Small Business database.

8(a) Certified Firms Location infographic

8(a) Certified Firms by Location as of April 2014

The top five states with 8(a) Certified Firms are:
1. Virginia – 901
2. California – 805
3. Maryland – 697
4. Texas – 638
5. Florida – 454

The top five states or US territories with the lowest number of 8(a) Certified firms are:
1. Vermont – 2
2. U.S. Virgin Islands – 3
3. Rhode Island – 6
4. Delaware – 9
5. Maine and  North Dakota (tie) – 11

This information is provided by Cloveer.com.

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

 

8a Program Eligibility – The $250,000 Adjusted Net Worth Requirement

Among the many 8a business development program eligibility requirements, the applicant for 8a Certification must have a personal adjusted net worth of less than $250,000 at the time of 8a Application Submission.

What is the definition of Adjusted Net Worth?

The algorithm used to determine Adjusted Net Worth for 8a Certification purposes is:

Adjusted Net Worth = Personal Assets – Personal Liabilities – [Equity in primary residence + value of ownership interest in applicant business + value of any IRA/401(k) or other retirement account that is subject to a penalty for early withdrawal]

If the applicant is married and the asset or liability is jointly held, you split the value 50/50. If the applicant is married and lives in a community property state, you only split assets and liabilities 50/50 if you have a transmutation or pre/post nuptial agreement that states otherwise.

How can I determine my Adjusted Worth?

You can easily determine your Adjusted Net Worth by using our Adjusted Net Worth Calculator.

anw

What is required to be submitted within the 8a Application to prove the applicant’s Adjusted Net Worth?

Each applicant, and their spouse, must submit a separate SBA Form 413, Personal Financial Statement. Along with the SBA Form 413 you must also submit statements for each asset or liability supporting the amounts reported. These statements cannot be any older than 30 days at the time of 8a Application submission.

Are there any ways to reduce an applicant’s Adjusted Net Worth below the $250,000 threshold?

For more information, contact us.

*Important* You cannot transfer an asset out of the applicant’s name within two years of the time your apply for 8a Certification for less than fair market value. Doing so will result in the full amount of the asset being re attributed back to the applicant.

The Unknown 70% Client Threshold for 8a Certification

Economic Dependence/The 70% Rule- as it applies to 8(a) Program Eligibility 

Economic Dependence is a significant obstacle to the eligibility of many applicants desiring to gain 8(a) Certification for their firms.  In fact, it is currently the issue for which we have to turn the greatest number of potential applicants away, until the issue is resolved.

First, a little history on the Economic Dependence issue, or the 70% rule as we often refer to it.  Per the Faison Office Products Office of Hearings and Appeals case in 2007, an applicant can be found to be dependent upon a single non-government entity if that entity constitutes 70% or more of the total revenues.

Businesses frequently start with a single client.  The application of this rule, and the timeframe for calculating this percentage, makes this an issue that must be examined closely.

In the past, such figures have been calculated by the SBA Area Size Manager over the previous fiscal year, or over the last 12 months.  The Size Manager will review the last three years of revenues, and thus revenue history even out beyond the last 12 months may be a factor in the final determination.  However, the 2013 OBTek OHA case found that the SBA could not reach into the past to determine this economic dependence, if the applicant “can prove, by clear and convincing evidence, that its interests are separate from those of the other concern”.  The applicant met that burden.  In this case the court found against economic dependence due to the fact that  the applicant’s revenues from a single entity had diversified to below 70% (only 18%), over a period of one month, which was the month immediately prior to certification.

This case continues to change the understanding of this issue, and its impact on 8(a) eligibility.  For some potential applicants, this means that this issue may be overcome in a relatively short time period, depending upon the circumstances.  This case implies that the month immediately prior to application must demonstrate that there is not a 70% issue based on the revenues deposited in the company bank account.  This should also be true during the month that a firm applies, and be able to be sustained for the duration of the application processing period, which can be six months or more.  The SBA reserves the right to request updated information at any time during the application process.

However, the OBTek OHA case had a very specific set of circumstances, which may not match the scenario of each potential applicant.  If you think that your firm may face a challenge on the 70% issue, we recommend that you speak to a qualified consultant before determining whether to proceed with an application for 8(a) Certification.

The risks are greater than merely a denial of 8(a) Certification.  If a firm is found to be economically dependent upon another entity, and a resulting size determination concludes that they are other than small, that would exclude the firm from being recognized as a small business for the purposes of contract awards.  This could be devastating to a small business.

To find out if you meet all of the SBA 8(a) Program eligibility requirements, please call us at 813-333-5800 or visit http://www.cloveer.com for a Free Consultation.