To apply for the 8(a) Program, you must provide certain financial statements for your business. We recommend that you have your accountant prepare the financial statements required by the SBA. However, if you use an in-house accounting system such as QuickBooks, you may be able to use financials generated from that system instead. Your financial statements are crucial to the 8(a) application process, and demonstrating your potential for success is a critical component of your application. Therefore, it’s essential to ensure that your business meets the eligibility requirements. Please note that tax returns or Excel worksheets cannot be used as a substitute for the required financial statements.
- You should ensure that all financials provided are prepared on generally accepted accounting principles or an accepted cash basis.
- 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. 2022, 2021, & 2020)
What does the SBA reviewer look for when they review these: *Note* The following items are taken from the current SBA SOP (Standard Operating Procedure).
- Are the current year to date financials no older than 90 days from date of receipt by the SBA?
- Are the aging schedules for A/P and A/R consistent with the year to date balance sheet?
- Are any A/P or A/R more than 90 days old?
- Do the balance sheets balance?
- Are current assets recorded properly?
- If the business is a dealer, wholesaler, or supplier, does the firm maintain any inventory?
- Does the firm have fixed assets? If so, are these fixed assets recorded properly?
- Are the fixed assets reported with depreciation or at actual value?
- Do the firm’s fixed assets correspond with its type of business? For example, if the firm performs construction work does it have construction equipment?
- If there is a partner shareholder or officer loan, is there a copy of the loan document? Is this loan reflected on the individual’s Personal Financial Statement section within certify.sba.gov?
- Are there loans or notes receivable from a shareholder, officer or partner?
- Has a copy of the loan or note been provided?
- Does the loan reflect generally accepted repayment terms? If not, is this item over-inflating the firm’s assets?
- Does the firm have the ability to service debts?
- Are there any loans that are questionable or that may raise concerns regarding control?
- Do retained earnings reconcile with previous financial statements?
- Does the listed business equity match that reported on the Personal Financial Statements of the owners?
- Is the profit and loss statement correctly calculated?
- Does the profit and loss statement show revenues in the appropriate business activity?
- Is “Cost of Goods Sold” included?
- Are the line items properly recorded?
- If there is an expense for salaries for employees?
- If there is an expense for worker’s compensation, if the firm has employees?
- Is the disadvantaged individual the firm’s highest compensated officer or employee? If not, has an explanation of the salary structure been provided?
- Are there any large subcontracting expenses that appear questionable?
- Does the firm appear to be in compliance with the percentage of work requirements for its primary business?
- Does the firm appear to have the necessary equipment, financial resources, working capital, etc., to perform 8(a) contracts it may be awarded?
- Are there questionable items listed on the statements, or have things changed significantly from the previous year end statement?
- Are there indications that excessive withdrawals have occurred?
- Does the firm have financing by non-disadvantaged individual(s) that would be considered critical financing? Also, is the loan payable upon demand?
- Are there any significant changes in any categories that create a concern? For example, have loans disappeared?
- What pattern are the revenues, profits, and losses showing? Is there a need to ask for clarification, such as an explanation of the reason for a downward trend or sudden revenue drop?
- Are there any discrepancies between the firm’s tax returns and the statements? Are these discrepancies based on cash versus accrual? If not, is reconciliation required? Does taking into consideration cash versus accrual reconcile the accounts?
- Do the balance sheets correspond with the tax return schedules? For example, are there shareholder loans on the tax return schedules that are not reflected on the financial statements?
- Do the statements and corresponding tax returns reflect any conversions from accrual to cash accounting?
