small disadvantaged business

8a Program Eligibility – The $750,000 Adjusted Net Worth Requirement

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Among the many 8a business development program eligibility requirements, the applicant for 8a Certification must have a personal adjusted net worth of less than $750,000 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 Personal Financial Statement. Along with the personal financial statement 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 $750,000 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.

8a Certification Advantages

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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 SAM.GOV 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 20 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.

DIY 8(a) Certification Usually Means Certain Denial by the SBA

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As the President of Cloveer, Inc. I speak to many clients who are interested in becoming 8(a) Certified. I would say that 7 out of every 10 people I talk to do not and cannot qualify for the 8(a) Program due to the strict 8(a) Program requirements. Many of these individuals have tried to prepare their own application without some sort of outside assistance and learn the hard way via denial by the SBA.

A few of these problems range from:

1. The applicant firm earning more than 70% of its total revenues from one single commercial client.

2. The applicant having an adjusted net worth that exceeds the SBA regulatory limit that cannot be lowered without violating the SBA transfer requirements.

3. Not being able to come up the required level of information and evidence required to prove social disadvantage to having an affiliation that may cause the SBA to find an unconditional control issue.

At Cloveer, we conduct a detailed free pre-qualification interview with all of our clients before we charge any fees or start preparing their 8(a) Application.  We ask our clients the “Killer” questions that will let us and more importantly them know if they have an eligibility issue, unknown to them. The fact is that there are ways around a lot of the eligibility issues but making changes may impact them beyond their comfort zone.  We advise our clients on the pros and cons to any potential eligibility issue and tell them when there is one that has no workarounds. Our feeling is that is it better for them to know now rather than later.

As you can see from our blog and website, www.cloveer.com, we provide more information about the 8(a) Program that all of our competitors. We want you to know as much information about the SBA 8(a) Program as possible since you will be the one participating and using it as one of the tools to becoming a success. The more you know the better decisions you can make before you apply and while you are in the 8(a) Program.

For more information on the 8(a) Program, please visit us at www.cloveer.com or call us at 813-333-5800.

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

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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.

Top 10 8(a) Program Continued Eligibility Problems

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1) Late or non-submission of 8(a) Annual Review documents. 

The most common eligibility problem 8(a) firms encounter is either the late or non-submission of required Annual Review documents. SBA is required to review each 8(a) firm’s program eligibility every year on the firm’s certification anniversary date. Your local SBA office will send a request for the required Annual Review documents and information shortly before the end of your program year which contains the date that your submission is due back to your Business Development Specialist (BDS). If it is not received by the due date, you will be sent a reminder and a second due date. If the information is not submitted by this second date, SBA’s rules & regulations require the SBA to start program termination proceedings against your firm. The termination process may result in the loss of your 8(a) certification. Once it is lost you cannot be certified in the program again. Since annual reviews are done every year on your anniversary date, you should be prepared for it and comply on time.

2) Late or non-submission of annual financial statements or failure to submit required type of statement based on sales level.  

Your year-end financial statements must be signed, dated and their accuracy verified by an authorized officer, partner, or sole proprietor of the concern. Firms with annual receipts of less than $2 million may submit statements prepared in-house, in accordance with “generally accepted accounting procedures” or have a compilation statement prepared by a qualified CPA or independent public accountant. Those firms with sales of more than $2 million and less than $10 million must provide reviewed statements, prepared by a qualified CPA or independent public accountant. Statements are due within ninety (90) days after the close of the company fiscal year. Those firms with total sales of $10 million and over are required to submit audited financial statements prepared by a CPA or independent public accountant. Those firms who will be submitting audited statements are allowed an additional 30 days due to the added complexity. The company’s sales figures on the Profit and Loss Statement must show the break-down of 8(a) and non-8(a) sales, if applicable. The submission of proper, year-end financial statements, (Balance Sheet and Profit and Loss Statements) is mandatory as a condition of 8(a) program participation, as noted in your signed 8(a) Participation Agreement. Firms who are delinquent in submitting annual financial statements are ineligible to receive 8(a) contract awards. In addition program termination proceedings may be initiated if financial statements are not received in this office by the required due date. Most 8(a) firms have calendar fiscal year end date (December 31). While the financial statement due date might correspond with the time that your accountant is doing your business & personal tax returns, there is no provision for any extensions to the financial statement submission date. Make sure that your CPA is aware of this mandatory 8(a) compliance requirement.

3) Failure to keep your BDS up to date on contact information changes, e.g. address, telephone number, e-mail address, etc.

8(a) firms must notify their BDS immediately upon making any changes to their contact information. Since they may be contacting you either via email, telephone, regular mail or certified mail, they must have accurate contact information for you. They are required by some of SBA’s regulations to use “certified mail, return receipt requested” to contact you regarding certain issues, such as Annual Reviews. Several firms have actually lost their 8(a) certification because they either didn’t notify SBA of their address change or they didn’t bother to pick up their certified mail at the post office.

Since the SBA may contact you  via email regarding the your Annual Review process, it is imperative that they have your proper email address and the SBA is not blocked by any SPAM filters.

4) Excessive compensation or withdrawals from the 8(a) concern.

Regarding the compensation of the owners of 8(a) firms, 13CFR 124.112 states the following: (d) Excessive withdrawals. (1) The term withdrawal includes, but is not limited to, the following: Cash dividends; distributions in excess of amounts needed to pay S Corporation, LLC or partnership taxes; cash and property withdrawals; payments to immediate family members not employed by the Participant; bonuses to officers; and investments on behalf of an owner. Although officers’ salaries are generally not considered withdrawals for purposes of this paragraph, SBA will count those salaries as withdrawals where SBA believes that a firm is attempting to circumvent the excessive withdrawal limitations though the payment of officers’ salaries. SBA will look at the totality of the circumstances in determining whether to include any specific amount as a withdrawal under this paragraph.

Withdrawals are excessive if during any fiscal year, they exceed (i) $250,000 for firms with sales up to $1,000,000; (ii) $300,000 for firms with sales between $1,000,000 and $2,000,000; and (iii) $400,000 for firms with sales over $2,000,000. The fact that a concern’s net worth has increased despite withdrawals that are deemed excessive will not preclude SBA from determining that such withdrawals were detrimental to the attainment of the concern’s business objectives or to its overall business development.

5) Failure to meet Competitive Business Mix targets.

To ensure that Participants do not develop an unreasonable reliance on 8(a) awards, and to ease their transition into the competitive marketplace after graduating from the 8(a) BD program, Participants must make maximum efforts to obtain business outside the 8(a) BD program. During both the developmental and transitional stages of the 8(a) BD program, a Participant must make substantial and sustained efforts, including following a reasonable marketing strategy, to attain the targeted dollar levels of non-8(a) revenue established in its business plan. You should use the 8(a) BD program as a resource to strengthen the firm for economic viability when 8(a) program benefits are no longer available. During the transitional stage of the 8(a) BD program, a Participant must achieve certain targets of non-8(a)contract revenue (i.e., revenue from other than sole source or competitive 8(a) contracts). These targets are called non-8(a) business activity targets and are expressed as a percentage of total revenue. The targets call for an increase in non-8(a)revenue over time. During their transitional stage of program participation, Participants must meet the following non-8(a) business activity targets each year:

Participant’s year in the   transitional stage

Non-8(a) business activity   targets (required minimum non-8(a) revenue as a percentage of total revenue)

1

15

2

25

3

35

4

45

5

55

The SBA will measure the Participant’s compliance with the applicable non-8(a) business activity target at the end of each program year in the transitional stage based on the Participant’s latest fiscal year-end total revenue. At the end of each year of participation in the transitional stage, the SBA will review the Participant’s total revenues to determine whether the non-8(a) revenues have met the applicable target. In determining compliance  the SBA will compare all 8(a) revenues received during the year, including those from options and modifications, to all non-8(a) revenues received during the year.

Consequences of not meeting competitive business mix targets. Any firm that does not meet its applicable competitive business mix target for the just completed program year will be ineligible for sole source 8(a) contracts in the current program year, unless and until the Participant corrects the situation. The SBA may initiate proceedings to terminate a Participant from the 8(a) BD program where the firm does not make good faith efforts to obtain non-8(a) revenues.

6) Failure of the person upon whom 8(a) eligibility is based to be the highest compensated individual in the firm.

13CFR 124.106 (3) allows non-disadvantaged individuals to participate in the management of an 8(a) concern but they MAY NOT receive compensation from the applicant or Participant in any form as directors, officers or employees, including dividends, that exceeds the compensation to be received by the highest officer (usually CEO or President). The highest ranking officer may elect to take a lower salary than a non-disadvantaged individual only upon demonstrating that it helps the applicant or Participant. You must obtain the prior written consent of the Director, Office of Business Development or designee before changing the compensation paid to the highest ranking

officer to be below that paid to a non-disadvantaged individual. See your BDS for further information or if you have questions on this matter.

7) Failure of the person upon whom 8(a) eligibility is based to devote full-time management to the 8(a) concern.

13CFR124.106 requires the following to maintain 8(a) eligibility:

(a)(1) An applicant or Participant must be managed on a full-time basis by one or more disadvantaged individuals who possess requisite management capabilities.

(2) A disadvantaged full-time manager must hold the highest officer position (usually President or Chief Executive Officer) in the applicant or Participant and be physically located in the United States.

(3) One or more disadvantaged individuals who manage the applicant or Participant must devote full-time to the business during the normal working hours of firms in the same or similar line of business.

(4) Any disadvantaged manager who wishes to engage in outside employment must notify the SBA of the nature and anticipated duration of the outside employment and obtain the prior written approval of the SBA. The SBA will deny a request for outside employment which could conflict with the management of the firm or could hinder it in achieving the objectives of its business development plan.

8) Failure to obtain prior SBA approval of ownership changes.

A Participant may change its ownership or business structure so long as one or more disadvantaged individuals own and control it after the change and the SBA approves the transaction in writing prior to the change. The decision to approve or deny a Participant’s request for a change in ownership or business structure will be made and communicated to the firm by the Director, Office of Business Development. The decision of the AA/8(a) BD is the final decision of the Agency. A decision to deny a request for change of ownership or business structure may be grounds for program termination where the change is made nevertheless. A change in ownership does not provide the new owner(s) with a new 8(a) BD program term.

9) Failure to Perform the Required Percentage of Work on an 8(a) Contract.

To assist the business development of Participants in the 8(a) BD program, an 8(a) contractor must perform certain percentages of work with its own employees. These percentages and the requirements relating to them are the same as those established for small business set-aside prime contractors, and are set forth in 13CFR125.6. A Participant must certify in its offer that it will meet the applicable percentage of work requirement both sealed bid and negotiated procurements. (a) In order to be awarded an 8(a) contract, the 8(a) concern must agree that:

(1) In the case of a contract for services (except construction), the concern will perform at least 50 percent of the cost of the contract incurred for personnel with its own employees.

(2) In the case of a contract for supplies or products (other than procurement from a non-manufacturer in such supplies or products), the concern will perform at least 50 percent of the cost of manufacturing the supplies or products (not including the costs of materials).

(3) In the case of a contract for general construction, the concern will perform at least 15 percent of the cost of the contract with its own employees (not including the costs of materials).

(4) In the case of a contract for construction by special trade contractors, the concern will perform at least 25 percent of the cost of the contract with its own employees (not including the cost of materials).

10) Failure to submit SBA form 1790 Representative Report.

13CFR124.601 requires each Participant to submit a semi-annually a written report to its assigned BOS that includes a listing of any agents, representatives, attorneys, accountants, consultants and other parties (other than employees) receiving fees, commissions, or compensation of any kind to assist such Participant in obtaining or seeking to obtain a Federal contract. The listing must indicate the amount of compensation paid and a description of the activities performed for such compensation.

For more information on the 8(a)BD Program, including the 8(a) Annual Review or 8(a) Compliance Service, please visit www.cloveer.com or call 813-333-5800.

8a Certification: How to determine if your AGI is below the $350,000 threshold.

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The $350,000 Threshold for Adjusted Gross Income (AGI)

Among the many 8(a) business development program eligibility requirements the applicant for 8(a) Certification must have is an average AGI over the past three taxes years of less than $350,000.

What is the definition of Adjusted Gross Income?

Adjusted gross income (AGI) is a tax term for an amount used in the calculation of an individual’s income tax liability. AGI is calculated by taking the applicants gross income and subtracting their maximum allowable adjustments. AGI is located on line Line 7 for 2018 personal taxes, Line 8B for 2019 Taxes and Line 11 for 2020 personal taxes.

How do I determine my Adjusted Gross Income for 8(a) Certification Purposes?

Step 1: The easiest way to initially determine if you exceed the $350,000 threshold, averaged over the last three years is to add up the AGI number reported on the first page of your last three years of federal tax returns.

Please note: If your portion of the applicant firm’s business income is negative or shown as a loss, you cannot deduct this loss from your AGI since losses from an S corporation, LLC or partnership are losses to the company only and are not losses to the individual and cannot be used to reduce your AGI.

If you add these three numbers, divide them by three and result is a number larger than $350,000 you must do further analysis. Go to Step 2.

If the number is less than $350,000 and your distributions taken out the company do not exceed the profits reported for your business on its tax return, your AGI is less than $350,000 without doing any further analysis.

If your distributions exceed the profits reported for your business, you must do further analysis. Go to Step 2.

Step 2: If your resulting calculation shows more than $350,000 or your distributions exceed the profits reported for your business on its tax return, and you are filing the taxes jointly with your spouse, you will then need to separate out the portion of any income reported on the tax return between the applicant and their spouse.

For example: (1040). Wages, salaries, tips, etc. = $100,000 (Applicant’s portion, $40,000 – Spouse’s portion, $60,000). Do the same for each income line as specified above.

Once you have separated out all income reported on the tax return between the applicant and their spouse take the total for the last three years and divide them by three. If the resulting calculation is still larger than $350,000 you must do further analysis. Go to Step 3.

If the number is less than $350,000 and your distributions taken out the company do not exceed the profits reported for your business on its tax return, your AGI is less than $350,000 without doing any further analysis.

Step 3:  There is one final analysis that can be performed to see if you still exceed the $350,000 AGI threshold. If the applicant business concern is an S corporation, LLC or partnership you may:

(Please note: Single Member LLC’s that file a Schedule C cannot use the below in their calculations, per the SBA):

  1. Deduct any income associated with the business that was reinvested into the business concern, less any distributions taken.

Example 1: Your applicant business income shown on the tax return is $100,000. You took $0 in distributions. The result is that $100,000 was reinvested or not distributed therefore the entire $100,000 can be deducted from your AGI calculation.

Example 2: Your applicant business income shown on the tax return is $100,000. You took $50,000 in distributions. The result is that $50,000 was reinvested or not distributed therefore the $50,000 can be deducted from your AGI calculation.

  1. Deduct any income used to pay the LLC or S-Corporation Federal taxes owed on behalf of the income from your LLC or S-Corporation income reported. Please note the SBA does not count or allow any State taxes you may have paid to reduce your AGI. Only Federal taxes paid are allowable to reduce your AGI.

In order to determine what the Federal taxable income tax that you paid on behalf of the business income reported on your tax return you must determine your IRS Income Tax rate.

To determine your IRS Income Tax rate, look at your 1040 form (Taxable Income).

Then, click here to visit a site that will show you your tax bracket percentage. Be sure the indicate the tax year, filing status and then lookup your tax bracket percentage based upon your taxable income.

Example: Your applicant business income shown on the tax return is $100,000. Your determined IRS Income Tax rate is 24% therefore you are responsible for $24,000 that would be paid to the IRS on the income from your business reported and the result would be an additional $24,000 that can be deducted from your AGI calculation.

As you can see from above, determining your AGI can be somewhat complex for 8(a) Certification purposes. Cloveer can help you to determine your AGI should you need further assistance. We offer an AGI Analysis Service for $250.00 where we will perform an analysis for the last three years and provide you a detailed report showing you exactly what your AGI is for each year and averaged over the last three years. If you are interested in this service, please request a service agreement or give us a call at 813-333-5800 for more information.

2 options to get your 8a application certified in the least amount of time possible

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Option 2 – 8a Application Review  – $2,550.00

  • For those who wish to complete the application on their own we offer an 8a 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 3 – 8a Application Completion Service – $4,500.00

  • 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 12 years we’ve been assisting clients obtain 8a certification, and want us to put it to use for them.  If you opt for our 8a Application Completion Service, we will work one-on-one with you to ensure that your 8a Application is 100% complete and compliant so the SBA can review and accept it the first time.

With 20 years and over 3,000 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.

15 8(a) Application Killers

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Spending the time upfront to ensure that your firm meets all of the eligibility requirements for 8(a) Certification can save you countless hours of frustration, the expense of putting the application together incorrectly and the difference between obtaining formal 8(a) Certification or not.

Below are just 15 of the 8(a) Application “Killers”. These will immediately tell you whether you have an issue that may prevent you from qualifying for 8(a) Certification.

1. The applicant (51% of more owner) must be a US Citizen when they apply.

2. The applicant must devote full time to the business concern that is applying for 8(a) Certification when they apply. This means the applicant must work at least 40 hours per week in the business concern without any outside employment.

3. The applicant must hold the highest management position within the business concern. Generally this is the CEO, President or Managing Member.

4. The applicant must be able to demonstrate that they are the highest compensated. Generally the SBA will deny your 8a application if you cannot demonstrate the applicant currently is the highest compensated or there is a very good reason why they have elected not to be.

5 The applicant must have an adjusted net worth of less than $750,000 at the time they apply. Adjusted net worth = Personal Assets – Personal liabilities – (Equity in primary residence + value of ownership interest in business concern + IRA/401(k) or Other Retirement Accounts subject to a penalty for early withdrawal). To determine if your adjusted net worth is lower than $750,000 use our adjusted net worth calculator.

6. The applicant’s AGI (Adjusted Gross Income) cannot be more than $350,000 averaged over the last three tax years.

7. The applicant must generally hold all licenses or professional certifications required to operate the business concern. If they do not, another equity owner cannot be the holder of the required licenses.

8. If the applicant has ownership in another business concern, other than the business concern that is applying for 8(a) Certification, the SBA may very well likely determine that you do not devote full time and therefore deny your 8(a) application. The only exception would be for ownership in an LLC for holding, managing and protecting real estate. There are ways to solve this issue and they vary depending on your unique condition.

9. The applicant cannot be on probation or parole. If the applicant has been arrested in the past it does not automatically deny them unless they were convicted of a specific crime. Having an arrest, regardless of how long ago, will severely delay the review of your 8a Application by at least 90 days.

10. The business concern must have been in business for 2 full years with evidence of reasonable revenues on its last two tax returns in the industry it is seeking 8(a) Certification for.  If it has not, you must seek a waiver and meet the 5 conditions set by the SBA to overcome this condition. Click here for detailed information on each of the 5 conditions.

11. The business concern and the applicant cannot have any delinquent tax filings or have any unpaid Federal, State or local obligations at the time of application. This condition can be overcome by filing the proper extension for delinquent taxes or by providing evidence of a current re-payment arrangement for unpaid Federal, State or local obligations.

12. The business concern must be at least 51% directly owned by the applicant and must be defined as a “Small Business” by the Federal Government. Your primary NAICS code, gross sales and sometimes the number of employees define your size standard that the SBA will base its determination on.. The business concern must also be a for-profit business and cannot be classified as a broker or be a subsidiary of another business concern.

13. The business concern’s current financial statements must exhibit positive net income, positive net equity and sufficient working capital at the time of 8(a) application submission.

14. The business concern must not earn more than 70% of its total revenue with one single client, within the last 12 months. This does not apply to a business concern if its direct billing client is a Federal or State Government. See more information on this topic.

15. The applicant or business concern cannot have previously participated as an 8(a) participant. The applicant cannot have any immediate family members who are current or previous participants in the 8(a) Program that are or were affiliated.

These are just 15 of the “Killers” that can potentially prevent your 8(a) Certification application from being successful. There are additional “Killers” and other areas that you should be concerned with prior to making the decision on whether you fully qualify for 8(a) Certification. If you have additional questions or would like to discuss your specific business situation, please call us at 813-333-5800 or visit www.cloveer.com.

Cloveer, Inc. pre-qualifies all of its full service clients prior to preparing their 8(a Certification Application. With over 3,000 successful clients to date. Read some of our testimonials.

What you won’t hear from Cloveer. Anyone can get 8(a) certified.

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The truth is that NOT everyone can get 8(a) Certified.

As the President of Cloveer, Inc. I talk to a lot of people who are interested in becoming 8(a) Certified. I would estimate that 7 out of every 10 people I talk to do not and cannot qualify for the 8(a) Program due to the strict 8(a) Program requirements.

Some these problems range from the applicant having an adjusted net worth that exceeds the SBA regulatory limit that cannot be lowered without violating the SBA transfer requirements to not being able to come up the required level of information and evidence required to prove social disadvantage to having an affiliation that may cause the SBA to find an unconditional control issue.

At Cloveer, we conduct a detailed pre-qualification interview with all of our clients before we charge any fees or start preparing their 8(a) Application. This is done so neither of us waste any time or money. We ask our clients the “Killer” questions that will let us and more importantly them know if they have an eligibility issue, unknown to them. The fact is that there are ways around a lot of the eligibility issues but making changes may impact them beyond their comfort zone.  We advise our clients on the pros and cons to any potential eligibility issue and tell them when there is one that has no workarounds. Our feeling is that is it better for them to know now rather than later.

As you can see from our blog and website, www.cloveer.com, we provide more information about the 8(a) Program that all of our competitors. We want you to know as much information about the SBA 8(a) Program as possible since you will be the one participating and using it as one of the tools to becoming a success. The more you know the better decisions you can make before you apply and while you are in the 8(a) Program.

For more information on the 8(a) Program, please visit us at www.cloveer.com or call us at 813-333-5800.

Do you meet the SBA 8(a) Program Economic Disadvantage Qualifications?

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Do you meet the SBA 8(a) Program Economic Disadvantage Qualifications?

One of the many requirements to become SBA 8a Certified is to be deemed to be economically disadvantaged at the time of your 8a Application submission. In order to meet this requirement you must:

1. The applicant(s) for 8a Certification  must have an adjusted net worth of less than $750,000 at the time of their application submission.

Adjusted Net Worth = Personal Assets – Liabilities – [Equity in primary residence + ownership interest in business + IRA/Other Retirement Accounts subject to a penalty for early withdrawal]. All assets jointly held are split 50/50. If you are unsure what you Adjusted Net Worth is, use the Cloveer Adjusted Net Worth Calculator  to determine if you are below the $750K limit. The online calculator offers specific advice and tips on determining some of the required amounts that must be  reported to the SBA.

Tip: You will be required to submit supporting statements for all assets and liabilities so make sure that you provide amounts that can be corroborated by the SBA.

There  may be ways to reduce your adjusted net worth below the regulatory limit.  Please contact us for specific advice on your situation.

2. The applicant(s) for 8a Certification cannot have more than $6,000,000 in total assets at the time of their application submission.

Total Assets = All Personal assets – IRA/Other Retirement Accounts subject to a penalty for early withdrawal.

3. The applicant(s) for 8a Certification cannot have an Adjusted Gross Income (AGI) of more than $350,000, averaged over the last three tax years.

AGI = Your total income – any federal taxes you paid on behalf of the corporation or LLC (from distributions taken) – any income attributed to your corporation or LLC  that is not distributed to you and essentially re-invested in the corporation or LLC.

If you are unsure if you meet this eligibility requirement, please contact us for a detailed review.