minority owned business

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

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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”.

*Important*

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?

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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.

DO NOT SUBMIT COPIES OF THE INDIVIDUALS STATE TAX RETURNS

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?

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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 meeting minutes must be submitted with your 8a Application and who is required to submit them?

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What meeting minutes are required?

At a minimum, you must submit a copy of the business concerns initial or organizational meeting minutes and at least the last two immediate years of annual meeting minutes.

Typically the initial or organizational meeting minutes are prepared at the time you formally organize your business concern. The initial meeting minutes will usually contain the following information:

  • A listing of all business concern shareholders, owners or members
  • Elections of the initial Board of Directors, Managing Member or General/Limited Partners
  • Election of all business concern officers such as the President/CEO, Vice President, Secretary and Treasurer
  • Resolutions acknowledging the  filing of the Articles of Incorporation, Organization or Partnership filing
  • Resolutions accepting the original Bylaws, Operating Agreement or Partnership Agreement
  • Any other general business topics discussed such as opening business bank accounts, officer salaries, etc.

Your Bylaws, Operating Agreement or Partnership Agreement will generally outline the requirements for holding meetings.  Typically each year a meeting is held with the purpose of electing or re-electing the Board of Directors, Managing Members or General/Limited Partners and all officers.

Who is required to submit them?

All business concerns that are formed as a Corporation, Limited Liability Company or Partnership must submit the meeting minutes as part of their 8a Application. If you operate as a Sole Proprietorship, you are not required to be submit meeting minutes.

 

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

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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

5 Ways to Find 8a Contract Opportunities

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1. Visit the SAM.GOV web site. It contains thousands of active federal procurement’s. The web site can be found by visiting https://sam.gov/content/home

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 https://www.navsea.navy.mil/Business-Partnerships/LRAF/. 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 https://sam.gov/reports/awards/standard

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.

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

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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.