The 8(a) Social Disadvantaged Narrative Explained

Get our 8(a) Social Disadvantage Narrative Manual, created by experienced 8(a) program experts with a track record of preparing SBA approved social disadvantage narratives. Instantly download our Manual featuring ten sample 8(a) narratives. Our manual  provides clear, step-by-step instructions to ensure your narrative aligns with current SBA standards for getting 8(a) certified and continued 8(a) program eligibility. Join the hundreds who’ve used our Manual and achieved SBA approval for their 8(a) narrative.

If you prefer to have Cloveer write your Social Disadvantage Narrative. Please complete our form and we will send you an invoice for payment.

Q. Why do I need to provide a Social Disadvantage Narrative?

On July 19, 2023, the U.S. District Court for the Eastern District of Tennessee issued a ruling in Ultima Servs. Corp. V. Dep’t of Ag. affecting the 8(a) Business Development program. Prior to this ruling, individual Black Americans, Hispanic Americans, Native Americans, Asian Pacific Americans, and Subcontinent Asian Americans applying for the program could establish that they were socially disadvantaged by demonstrating that they held themselves out as a member of one of those designated groups. This practice has been known as using a “rebuttable presumption of social disadvantage” or “presumption of social disadvantage.”

While most 8(a) firms established their 8(a) program eligibility through a presumption of social disadvantage, other 8(a) firms were admitted to the 8(a) program because the qualifying individual owner established social disadvantage by a preponderance of the evidence (i.e. submitted a narrative as part of the original application).

In this ruling, the Court barred SBA from using the presumption of social disadvantage to administer the 8(a) Program.

Under DOJ guidance regarding the Court’s order, SBA is requiring all 8(a) participants who originally relied upon the presumption of social disadvantage in their application to re-establish their 8(a) Program eligibility by completing a social disadvantage narrative.

Once submitted, SBA will review your narrative to determine that the firm’s owner(s) has demonstrated personal social disadvantage. Once approved, SBA will provide a social disadvantage qualification letter documenting that you have established social disadvantage and may continue to receive 8(a) contracts and otherwise participate in the 8(a) BD Program. Consistent with existing regulations, 8(a) Participants will only need to establish social disadvantage once for their program term, unless there are ownership/control or other changes which affect eligibility.

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Q. Who needs to prepare a Social Disadvantage Narrative?

As of August 22, 2023, the SBA now mandates that both current certified 8(a) Program participants and prospective 8(a) applicants applying to the 8(a) Program must furnish a social disadvantage narrative, irrespective of their minority or non-minority status.

This new requirement applies to individually-owned firms only and does not impact entity-owned firms, such as firms owned by Indian tribes, Alaska Native Corporations, or Native Hawaiian Organizations.

8(a) Program Financial Statements – 35 important items the SBA will review

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.

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

They rely solely on the 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 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 $850,000 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.