Why most people fail at getting their business 8(a) certified?

They rely solely on the certify.sba.gov eligibility questionnaire to determine if they qualify for the 8(a) Program.

If you answer the five questions “Yes” within the “Are you eligible for the 8(a) Business Development Program?” questionnaire on certify.sba.gov the results will state “Based on the responses you provided above, you appear to be eligible for the 8(a) Business Development Program”. 

Do not assume that by answering these five questions you are truly eligible for the 8(a) Program. 

8(a) Program Two Year Waiver Requirements

Your business must possess reasonable prospects for success in competing in the private sector if admitted to the 8(a) program.

To do so, it must be in business in its primary industry classification (NAICS code) for at least two full years (24 months) immediately prior to the date of its 8(a) application and be able to provide business tax returns for each of the two previous tax years that show sufficient operating revenues earned within the primary industry (NAICS code) in which the applicant is seeking 8(a) certification for.

8(a) Application Tip on Business Tax Returns

The SBA will verify the following:

Have you provided complete copies of the Federal business tax returns for the last five years.

  • 1120 or 1120s for Corporations.
  • 1065 for Limited Liability Companies and Partnership.
  • Schedule C for Sole Proprietors or Single Member LLC’s treated as disregard entity.

8(a) Economic Dependency or the 70% Rule Explained

Do you have all your eggs in one basket? Economic Dependence is a significant obstacle to the eligibility of many applicants desiring to gain 8(a) Certification for their business. In fact, it is currently the #1 issue for which we have to turn the greatest number of potential 8(a) applicants away, until the issue is resolved.

DIY 8(a) Certification usually means certain denial or a returned application by the SBA

As the President/CEO of Cloveer, Inc. I speak to many potential 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 or a returned application by the SBA.

Here are a just six of most typical few reasons for a denial by the SBA we find when speaking to potential 8(a) Applicants:

  1. The 8(a) Applicant firm being found to be “Economically Dependent” by earning more than 70% of its total revenues from one single client over the periods of time measured by the SBA.
  2. The 8(a) Applicant having an “Adjusted Net Worth” that exceeds the $750,000 SBA regulatory limit that cannot be lowered without violating the SBA transfer requirements or having a spouse who is involved with the Applicant Firm whose Adjusted Net Worth exceeds this requirement too.

HUBZone Principal Office Shared Coworking Space Rules

The SBA HUBZone Office put out some new rules regarding shared office spaces.  While these rules may seem stricter, it is actually good that they have put the policy in writing so that it is clear on what will qualify for your principal office and what will not.  For companies looking to lease a new space or apply to the HUBZone program, please follow the guidelines below and share this with your landlord so that your lease can include all required information.  This new policy should be posted to the SBA’s website soon.

Who counts as a Hubzone resident and how do you prove it?

By now you probably know that at least 35% of your total employees must reside in a HUBZone.  By total employees, we mean every single employee that works more than 40 hours a month, no matter where they work.  This means employees that work at your principal office, other office locations, jobsites, and remotely from home, all count towards that 35% that you must meet.