8a Certification: The most overlooked eligibility issues.

Getting successfully 8(a) Certified can be very difficult. The latest statistics show that only 2 out of every 10 self-prepared 8(a) Applications result in successful 8(a) Certification by the SBA.

In fact, as of April 29. 2015 there are only 6,659 firms that are active 8(a) participants according to the the SBA Dynamic Small Business Search System. Don’t go it alone. Cloveer is here to help should you need assistance with your 8(a) Application.

Here are just a few of the most overlooked eligibility issues that come up from clients we speak that assumed they qualified for the 8(a) Program.

1. Economic Dependence.

No where in the SBA regulations does it clearly spell out that a firm must have multiple active clients to get successfully 8(a) Certified nor does it speak specifically to the economic dependence rules. The only mention in the Code of Federal regulations where it discusses economic dependence is within CFR 13; part 121 – 124.103 – How does the SBA determine affiliation. Here is an except from the current regulations:

(f) Affiliation based on identity of interest. Affiliation may arise among two or more persons with an identity of interest. Individuals or firms that have identical or substantially identical business or economic interests (such as family members, individuals or firms with common investments, or firms that are economically dependent through contractual or other relationships) may be treated as one party with such interests aggregated. Where SBA determines that such interests should be aggregated, an individual or firm may rebut that determination with evidence showing that the interests deemed to be one are in fact separate.

The simple fact is that the SBA will look at the totality of your circumstances to determine whether economic dependence exists. Read our blog article on Do you meet the 70% Economic Dependency Rule for detailed information on whether or not you will be found to be economically dependent by the SBA.

2. Outside Ownership in Any Other Business

No where in the SBA regulations does it clearly spell out that you cannot have ownership interest in any other business to get 8(a) Certified.

The rule is that the applicant must devote full-time to the 8(a) Applicant business without any outside employment. When you have ownership interest in an another business the SBA will most likely conclude that you are not devoting full-time to the 8(a) Applicant business even if you are not materially participating in this outside business.

The only exception by the SBA is if this outside business is an LLC for the purposes of solely holding or investing in real estate. The tax returns for this other entity must clearly show that this is the sole purpose of the business.

3. Applying for a Waiver to overcome the fact that the business has not been business for two full years.

No where in the SBA regulations does it indicate that your firm must have at least 1 (one) year of revenue earned in it primary NAICS shown on a tax year to even apply for a waiver. If you are start-up and have not filed at least one tax return showing sufficient revenues (@100K or more) on it do not even think about applying for the 8(a) Program. You will most likely be denied by the SBA for not meeting their “Potential for Success” requirement.

Read our blog article on How to get 8(a) Certified if your firm has been in business for less than two years for more information.

These are just a few of the most overlooked eligibility issues. For more, just give us a call at 813-333-5800. We would be pleased to take you through a FREE and very detailed pre-qualifying interview that will help identify any potential show stoppers.

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 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.

 

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.

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.

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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.

8a Certification Advantages

8a certification is a valuable marketing vehicle for socially and economically disadvantaged small businesses to access the federal government marketplace. Initially, contracting under the 8a Program may seem more difficult than other methods. However, it is no more complicated than contracting under full and open competition through the sealed bid procurement process and it presents many advantages for both the government and the 8a contractor.

Advantages to the Government

A big advantage for government procurement personnel in selecting the 8a contracting method is that the agency does not have to solicit bids and may choose a specific 8a contractor to fulfill its requirements. For sole-source requirements under the competitive thresholds, the contracting agency can identify the 8a company to perform a contract by simply naming that company in an offering letter to the SBA. Of course this does not happen by itself. The 8a firm must actively self-market with the contracting agency or be introduced to the contractor through a referral. For competitive 8a requirements, the contracting agency does not have the same ability to choose a contractor, although the competition can be limited to eligible 8a companies within a certain geographic area or participation stage.

Another advantage for the government is that they can often get what they need faster by contracting though the 8a Program. This is because competitive requirements must be synopsized in FedBizOpps and the resulting solicitation must be open on the street for a minimum of 30 days. This process for full and open competition can take several months. 8a contracts have no synopsis requirements (except for competitive 8a contracts) and contracting agencies are not required to allow 8a firms 30 days to respond to the solicitation. Therefore 8a contracts can be finalized much faster.

Advantages to the 8a Contractor

The advantages to an 8a company are great. An 8a company can obtain federal contracts on a sole-source or limited competition basis much faster than in a full and open competition. For many small businesses, the costs of preparing proposals are very prohibitive. If the contract is a sole source, the 8a firm does not have to endure the costs associated with preparing a competitive proposal and participating in subsequent rounds of discussions with the contracting agency’s contracting officer.

Once the buying agencies are aware of the advantages of the 8a process and have a good experience with your 8a firm, they will most likely prefer to extend future contracts to you. The SBA plays a role in the beginning of the contracting process by verifying and approving the requirement for the 8a company. Once the requirement is in place, the 8a company and the federal agency deal directly with each other during negotiation of the contract and during performance of the contract.

Looking for help with Getting 8a Certified?

For 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.

A list of supporting documentation that must be submitted with your 8a Application

Here is a typical list of supporting documents that will need to be included within your 8(a) application:

  • Evidence of concerns registration in SAM (System for Award Management) and DSBS (Dynamic Small Business Search) systems
  • Personal federal tax returns for the last three filing years
  • Company federal tax returns for the last three filing years
  • A company balance sheet and income statement no older than 90 days and for the last three completed years
  • Personal resume
  • List of current and past federal and non-federal contracts and invoices within the last two completed fiscal years
  • Letters of reference from current and/or past clients
  • Current certificate of good standing
  • Stock certificates/Stock ledger (Corp)
  • Articles of Incorporation/Organization/Partnership Agreement including any foreign filings
  • Bylaws or Operating Agreements
  • Meeting minutes (Corp and LLC)
  • Buy/Sell or Voting Agreements
  • DBA or Fictitious Business Name Filing
  • Organization chart
  • Business bank signature card
  • business and special licenses
  • Business loan agreements
  • Brief history of the business
  • Lease agreements for business
  • Business insurance
  • Personal financial statement supporting statements (Checking, Savings, IRA w/terms, etc..)
  • Proof of Citizenship
  • Trust Agreements
  • Statement of Bonding Limit
  • Letter of No Objection

Keep in mind that each 8(a) Application is unique and document requirements vary based upon the entity type and number of applicants.