Lesser Known SBA 8(a) Application Rules That Might Affect Your Application
Most 8(a) applicants are already familiar with SBA 8(a) program rules such as the personal net worth limitations and the categories of individuals who are deemed socially disadvantaged; however, there are a variety of other lesser known SBA 8(a) rules and qualifying factors that are equally important to consider.
Here is a quick rundown about three such rules you should know before applying for this federal business development certification:
- The 70 Percent Rule. If your company only has one commercial B2B (business-to-business) client or if the bulk of your gross revenue (meaning 70 percent or more) comes from one commercial client / prime contractor, your company is not eligible for 8(a) certification—yet. Diversify your client mix, take on some other projects from other sources, and get the ratios balanced so that no single client equates to 70%+ of your gross revenue and you can apply. The only exception to this rule is if your major client is the federal government itself; the contract must be direct meaning you are the prime, though.
- The Full Time Devotion Rule. You probably already know that 51% or more of your company must be controlled by one or more socially and economically disadvantaged individuals, but did you know that the 8(a) qualifier(s) must work full time during normal business hours for the company, too? Outside employment, being a full time student, or devoting too many hours during the business day towards charitable or outside work violates the SBA’s full time devotion rule. The SBA will not only measure full time devotion by checking if the 8(a) applicant works 40 or more hours for the company per week; the SBA will also check to make sure these 40 hours are during standard business hours for the industry.
- The Affiliation Rule. The government’s affiliation rule is actually a cluster of related rules and regulations so complex they deserve their own separate blog post, so we will only scratch the surface here in discussing affiliation. In a nutshell, the federal government defines what constitutes an “affiliated” company or entity linked and associated with your company. So, an entity you might regard as a mere teaming partner, mentor, or supplier might get labeled by the SBA as an “affiliate” of your company, which might in turn hurt your 8(a) application by rendering your company “other than small” in size through this affiliation. A future post will dissect affiliation further; in the mean time, to learn more about the affiliation rule or rules, we recommend you take a look at the SBA publication entitled “An Overview on Affiliation.”
For more information about SBA 8(a) rules and regulations we recommend you look at our website www.8aapplication.com where you can read excerpts from the 8(a) rules and regulations as well as download templates, forms, kits and tip sheets for prices ranging from zero dollars to $60.