How does the SBA review the business concern’s tax returns during the 8a Application review process?

The SBA will verify the following:

a. Have you provided complete copies of the business concern’s Federal business tax returns for the last three years. If the business concern is a sole proprietor, you must submit the Schedule C for the last three years?

– 1120 or 1120s for Corporations

– 1065 for Multiple Member LLCs

– Schedule C for Sole Proprietors or Single Member LLCs


b. Have all schedules and additional statements that are mentioned within the business tax returns been included?

c. Do you have any questionable items on the schedules or statements that require additional explanations? If so, we suggest you address these items within your 8a Application paperwork to be provided.

d. Do the tax returns indicate that the business concern has been operating in its primary industry (NAICS) code for at least the last two years? Your tax return should identify the six digit NAICS code which is identified as your primary NAICS code on your 8a Application paperwork. If the NAICS code identified on the tax return is different than the primary NAICS code identified on your 8a Application paperwork you must include a NAICS code explanation letter within your 8a Application.

e. Does the business tax information correspond with the financial statements (Balance Sheet and Income Statement) included within your 8a Application paperwork?

f. Can the salaries, wages and distributions of the 8a applicant, officers or partners be verified?

g. Does the percentage of ownership identified on the tax returns correspond with the 8a Application paperwork?

h. If the business concern has elected to be treated as an S-Corporation, have you provided copies of all K-1s.

i. Have you included copies of the cancelled check, bank statement or IRS account balance transcript to show payment for all amounts indicated on the “Amount Owed” line of the tax return?

j. What trend do the tax returns show? (i.e. downward trend in income, substantial gain in income, etc.) If the business concern’s tax returns show a significant downward trend or increase in sales you should be prepared to respond to potential SBA questions as to why?

View the related article on “How does the SBA review the Individual’s tax returns during the 8a Application review process?


Unconditional Ownership Requirements for 8a Certification

The business concern that is applying for 8a Program Certification must be at least 51% unconditionally and directly owned by one or more economically and socially disadvantaged individuals who are US citizens.

Unconditional ownership is defined as ownership that is not subject to conditions precedent, conditions subsequent, executory agreements, voting agreements, restrictions on or assignments of voting rights or other arrangements causing or potentially causing ownership to go to another (other than after death or incapacity).

As stated above, ownership must be direct and cannot be owned by another business entity or by a trust that is in turn owned and controlled by one or more economically and socially disadvantaged individuals.  However, in the case of ownership by a trust, such as a living trust, ownership will be treated as direct where the trust is revocable, and the disadvantaged individual is the grantor, a trustee, and the sole current beneficiary of the trust.

In the case of a Partnership, at least 51% of every class of partnership interest must be unconditionally owned by one or more of disadvantaged individuals.

In the case of a Limited Liability Company, at least 51% of each class of member interest must be unconditionally owned by one or more of disadvantaged individuals.

In the case of a Corporation, at least 51% of every class of voting stock outstanding and 51% of the aggregate of all stock outstanding must be unconditionally owned by one or more of disadvantaged individuals.

The SBA will disregard any unexercised stock options or similar agreements held by the disadvantaged individuals. However, any unexercised stock options or similar agreements held by anyone other than a disadvantaged individual will be treated as exercised.

The pledge or encumbrance of stock or other ownership interest as collateral, including seller financed transactions, does not affect the unconditional nature of ownership if the terms follow normal commercial practices and the disadvantaged persons retain control absent violations of the terms.

These are just a few of the requirements that must be met to ensure unconditional ownership. Please contact to discuss your unique business circumstances to ensure you meet all unconditional ownership requirements.

How does the SBA determine if an 8a applicant business concern is defined as a Small Business?

The 8a applicant business concern must define their primary North American Industry Classification System (NAICS) code with the 8a Application paperwork. The primary NAICS code is the six digit code in which the business concern earned its largest segment of annual receipts or total income, in the most recently completed fiscal or taxable year.

For example, a business concern that earned its largest segment of total income engaged in commercial or institutional building construction would have a primary NAICS code of 236220.

To begin determining if the business concern is defined as a Small Business, the SBA will lookup the size standard for the NAICS code.

For example, the size standard threshold for NAICS code 236220 is $33.5M.

The SBA will then add the amounts reported on the business concerns “Gross Receipts or Sales” line of their business tax return for the last three taxable years and determine its three year total income.

Finally, the SBA will take the three year total income and divide this amount by three to determine its three year average total income.  The three year average income amount is the amount used to determine if the business concern is below the size standard threshold for their primary NAICS code.

In our example, if the business concern’s three year average income is less than $33.5M, the business concern will be classified by the SBA as a “Small Business”.


When the SBA examines the size of the business concern they will look for any possible issues involving affiliation. Affiliation arises when the business concern controls another firm or another firm controls the business concern. It can also arise when one individual has the power to control both the business concern and another firm (e.g. this individual owns more than one firm) or there are identical or substantially identical business or economic interests, such as family members, persons with common investments or firms that are economically dependent through contractual or other relationships. The SBA will also consider ownership, management, previous relationships with or ties to another firm, and contractual relationships in determining whether affiliation exists.

If you suspect that you may possibly have an affiliation with another firm, contact Cloveer for further assistance.

How does the SBA review the Individual Tax returns during the 8a Application review process?

The SBA will verify the following:

a. Have you provided complete copies of the personal Federal tax returns for the last three years from all required individuals. Federal tax returns are required from each 8a applicant and each officer, director, partner, member and anyone who holds more than 10% ownership interest in the business concern.


b. If any of these Individuals are married and have filed taxes separately, have you submitted the personal tax returns for each spouse?

c. Have you included all W-2 forms and do they add up to the wages reported on the personal tax returns?

d. Have all schedules and attachments identified been included?

e. Do the 8a applicant’s tax returns verify that they devote full-time to the 8a applicant business concern?

If not, has the 8a applicant provided a letter from each past employer indicating their last date of employment?

f. Does the 8a applicant’s tax return show that he or she is the highest compensated individual within the business concern?

If not, has proof been included that verifies that the 8a applicant is the highest compensated individual?

g. Have all tax returns been signed?

h. Have you included copies of the cancelled check, bank statement or IRS account balance transcript to show payment for all amounts indicated on the “Amount you Owe” line of the tax return?

View the related article on  “How does the SBA review the business concern’s tax returns during the 8a Application review process?”

What is the impact of an Arrest Record on an 8a Application?

What is the impact of an Arrest Record on an 8a Application?

Any individual who has an arrest record must indicate this on their SBA Form 912 within the 8a Application.

What is the impact:

The impact of an arrest record can be a denial of the participants 8a Application or a delay in its processing.

If the individual is currently on parole, probation or has been convicted of a major crime  (for example, rape, child molestation, murder, tax evasion, financial fraud, etc.) there is a high likelihood that the 8a Application will be denied for failing to meet the SBA’s Good Character requirement.

If the individual has an arrest record, is not on parole, probation or has not been convicted of a major crime the SBA will freeze the 90 day 8a application processing clock. A copy of the individuals SBA Form 912 and completed fingerprint card is subsequently forwarded to the FBI for review. A delay in the processing and determination in the amount of 3-6 months is not out the question when there is an arrest indicated within an 8a Application.

What must be provided to the SBA:

The individual who has identified an arrest record must:

a. Submit a completed SBA specific FD-258 Fingerprint Card. An SBA specific FD-258 may be obtained from your local SBA district office. The card provided cannot have any holes, staples, additional marking or any alterations and must be completed in black ink.

It is the individuals responsibility to go to local law enforcement agencies to obtain legible fingerprints.

b. Provide details of the arrest (i.e., fines paid, jail time, probation served)

c. Include copies of all court disposition papers

If you have additional questions or concerns, please contact cloveer for more information.

What financial statements are required to be submitted for an 8a application?

All firms applying for 8a Certification must submit the following financial statements:

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

The last three years of Balance sheet and income statements (e.g. 2021, 2020, & 2019)

You should ensure that all financials provided are prepared on generally accepted accounting principles.

Your current year to date financials must exhibit the following:

  • Positive net income
  • Positive working capital
  • Positive equity

Reasons why most who try to apply for 8a Certification on their own fail

1. There are no clear instructions detailing what the SBA is really looking for. Applicants are left to guess what information will satisfy all of the SBA’s requirements. We frequently hear from clients who have spoken to or have even met with SCORE, their local SBA district office, Small Business Development Center (SBDC) or Procurement Technical Assistance Center (PTAC) and are given incorrect advice or answers that end up getting there 8a Application returned for deficiencies or worse yet denied.

2. The SBA checklist’s that exist are incomplete. If you follow the SBA checklist precisely, your 8a Application will be questioned or returned as deficient since it does not contain every item that must be provided. Every letter that you receive back from the SBA results in a 30 to 90 day delay. In the event the SBA sends your entire 8a Application back, you will have to start fresh again and hope that you get it right the next time. We call this the endless review cycle at the SBA since they cannot inform you of every wrong problem with your 8a Application the first time, since they did not have everything needed to perform their full review.

3. The SBA does not tell you how they want you to organize and package your 8a Application. Improperly organizing your 8a Application paperwork such as putting it in a notebook with tabs, stapling papers, using binder clips and plastic sleeves, will delay the processing of your 8a Application.

4. The 8a electronic application does let you know if you answer a question that will result in denial. Yes, if you answer some of the SBA’s questions incorrectly you will be denied 8a Program entry without giving you the opportunity to possibly correct a denial situation before submitting. You will have to wait a full 12 months to re-apply if denied.

5. You will have to modify your existing corporate Bylaws, LLC Operating Agreement, or Partnership Agreement and the SBA does not tell you how or why, and only tells you after you submit your 8a Application. Unless you spend the time reading the code of federal regulations that govern the 8a Program, and truly understand them, these documents will be challenged if submitted in their current versions.

6. Your chance of getting the SBA 413 forms, personal financial statements correct the first time, are slim. The SBA 413 form was not developed primarily for the SBA 8a Program. It was developed for a SBA loan program and is used by the SBA for the 8a Program since it asks for some information they need and some they don’t.

7. Every applicant must produce a economic disadvantage narrative that meets the SBA adequate evidence standard but no real advice is given on how to properly prepare the narrative. Did you know that being a member of a SBA designated group and writing the narrative is not everything needed to prove you are economically disadvantaged. There is another area that you must prove to be economically disadvantaged that the SBA does not tell you about in their application paperwork. No longer required by the SBA as of August 24, 2016.

8. Not a member of one of the SBA’s designated groups? Did you know that the level of evidence required to prove social disadvantage requires is called “Preponderance of Evidence”?. This level of evidence is much greater than just writing a narrative.

9. Haven’t been in business for two full years with revenues and taxes to prove it? The required “two-year waiver” needed to convince the SBA that you have “potential for success” only gives you the conditions that you must meet but they do not tell you what to provide to prove how you have met each condition.

10. Only have one client and/or you derive more than 70% of your revenues/sales from them?. You will be denied 8a Program entry due to economic dependence and you will not find this rule in any SBA regulation governing the 8a program. The SBA uses Office of Hearing and Appeals (OHA) cases to set 8a program precedence for this requirement and others not named.

These are just 10 of the reasons why most people fail when they try to apply for 8a Certification themselves.

5 Ways to Find 8a Contract Opportunities

1. Visit the SAM.GOV web site. It contains thousands of active federal procurement’s. The web site can be found by visiting

You can narrow down your search for 8a set-aside contract opportunities or set-up an account to automatically receive targeted opportunities via email. We suggest that you specifically look for 8a opportunities that are in the pre-solicitation or sources sought phase as most of the other phases are too far along in the procurement process already.

2. View each Federal agency’s long range acquisition forecast (LRAE). For example Each major federal agency maintains a LRAE which identifies anticipated procurements upcoming that are over $100,000.

3. Contact each Federal agency’s OSDBU (Office of Small Disadvantaged Business Utilization) office. The OSDBU’s ensure that small and disadvantaged businesses are provided maximum practicable opportunity to participate in the agency’s contracting process. The primary responsibility of the OSDBU is to ensure that small businesses are treated fairly and have an opportunity to compete and be selected for a fair amount of the agency’s contracting and subcontracting dollars. You can find the contact information for each OSDBU office by visiting each Federal agency’s web site.

4. Visit the the SAM.GOV databank web site. It contains every federal procurement that has ever taken place. The web site can be found by visiting

You can search and find out which agency is buying your products or services, the names of your competitors who were awarded past contracts, their dollar value, location, NAICS code and more.

5. Finally, narrow down the Federal agencies who you want to do business with, find out who the contracting officers are, setup a face to face meeting, and market your products and services to them.

What are the benefits of 8a Certification?

1. You will have access to sole source/non-competitive contracts with a value of:

– $4M and under for all services related contracts
– $6.5M and under for manufacturing related contracts

2. You will have access to competitive set-aside contracts with a value of:

– $4M and over for all services related contracts
– $6.5M and over for manufacturing related contracts

3. You will severely limit your potential competition.

– There are less than 10,000 active 8a participants in the entire 8a Program
– The big-guys (Lockheed Martin, CSC, EDS, Halliburton, etc.) cannot compete for these contracts

4. It is easier for your federal prospects to buy from you.

– 8a contracts require much less paperwork, time and bureaucracy than most other procurement methods
– 8a contracts cannot be protested

5. It is a much faster contract award process.

– 8a contracts take about 1/10 the amount of time to be awarded compared to most other procurement methods

If you are looking for a company to assist in the process of getting your business 8a Certified, contact today.

8a Certification – A Powerful Tool You Should Have In Your Toolbox

There is a lot of opportunity within the federal government for minority, women, handicapped and service disabled owned businesses. The federal government has a very large budget, a lot of customers and a seemingly endless list of requirements that must be met.

In order to work with the federal government you need patience, a clear cut strategy and funding.

But most importantly you need a tool that the federal government can use to get to your products and services.

One powerful tool is SBA 8a Certification.

Getting 8(a) Certified

Navigating through the complex 8a Application process can be daunting.

Many companies find the need to outsource the 8a Application process to a company that specializes in getting companies 8a Certified. Why? The process is very time intensive and most business owners need this time to focus on their core competencies and realize that completing the complex SBA 8a Application is not a skill set of theirs. Using a company that specializes in getting companies 8a Certified can provide a good return on investment (ROI), is a very good use of resources available and can be much faster than doing it themselves.

8a Certification is like getting a license to hunt for business. It does not automatically bring in new business but it gives your more opportunities if you are already out there. 8a Certification is just one tool in your important toolbox that can be used to open doors and give your business a “leg-up” in the federal contracting arena.

Developing a Clear Cut Strategy Once You’ve Become 8a Certified

Every agency has an Office of Small and Disadvantaged Business Utilization (OSDBU). You as the business owner need to be out there formulating relationships with the key contacts within the OSDBU’s. They may use your 8(a) Certification to procure your products and services but ultimately they buy from people and it is about the relationships you establish.

We suggest you start with a narrow focus. Focus on one agency that is closely aligned to your core competencies.

Find an agency that is small business friendly. Some are more small business friendly than others.

Work to develop your relationships within that agency both directly, with your key contacts and indirectly, with prime vendors through subcontracting relationships.

The Importance of Funding for Your Business Once You’ve Become 8a Certified.

It is important to also have a strong financial infrastructure for your business. Two things that can put a company out of business are unmanaged growth and under capitalization. Many young 8a Certified companies company are at risk for one or both of these.

Unmanaged growth can occur when you land a large federal 8a set-aside contract and you are unable to meet the manpower, facility or other contract needs in a timely and cost effective manner.

Under capitalization can occur when you have to scale quickly and hire people but can’t pay those people. This can literally put you out of business. It is important for your business to have a strong financial backbone.

The best time to look for a bank that believes in your business plan, mission and vision and that can help you grow strategically is when things are going well. The time to go evaluate potential banks for funding is when you have profits. Setting up these funding relationships before you need them, not when you are in panic mode is important so you can think strategically.

If you are looking for a company to assist in the process of getting your business 8a Certified, contact us today to discover what Cloveer can do for you.