Time to Startup!

The BizFilings blog covering business tips and trends.

Is Your Small Business Eligible for Certification?

Published on Jul 29, 2010

Summary

Read 'Is Your Small Business Eligible for Certification?' at 'Time to Start Up,' the small business blog by BizFilings.
certificateDid you know that there are certifications that can benefit small businesses?  Both at the Federal and State levels, many of these certifications can help you gain access to government contracts and some additional funding opportunities. A few examples are WBE (Women's Business Enterprise), DBE (State Disadvantaged Business Enterprise), MBE (State Minority Business Enterprise), and HUBZone certifications.   One additional program which could open doors for your small business is the SBA 8(a) DB Program. According to www.bizcentralusa.com, "one of the least understood and most often misunderstood certifications is the SBA 8a certification."   The Small Business Administration (SBA) defines the 8(a) Business Development (BD) program as being "named for a section of the Small Business Act, is a business development program created to help small disadvantaged businesses compete in the American economy and access the federal procurement market." To qualify for the SBA 8a Certification, the business must be:
  • a small business
  • unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States
  • demonstrate potential for success
So what does this mean in the real world? How small is a "small business", and who decides if your business has the "potential for success"? Well, the SBA actually goes on to define each requirement in fairly significant detail so there's no doubt about whether one would qualify or not. As for business size, there are different requirements for different industry types. So for example if your business is in Wholesaling your maximum number of employees can range from 100 to 500, but if you're in Retailing the measurement is not employees but annual receipts (for Retail it may not exceed $5.0 to $21.0 million). The second qualification has the most room for interpretation by the SBA application review team. The SBA requires that at least 51% of the company is directly and unconditionally owned by socially and economically disadvantaged individuals. And, the SBA considers individuals that "have been subjected to racial or ethnic prejudice or cultural bias" to be socially disadvantaged individuals. You will need to document examples of personal experiences that are substantial and chronic, or demonstrate a hurdle to entry into or advancement in the business world. You may also be a member of one of their pre-designated disadvantaged groups. Economic disadvantage is judged separately, and must include examples of cases where the "ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities." The SBA considers the business' potential for success requirement based on the following:
  • the technical and managerial experience of the company's managers
  • the company's operating history
  • the businesses ability to access credit and capital
  • the company's financial capacity
  • the company's record of performance
  • whether the company or employees hold the requisite licenses if the firm is engaged in an industry requiring professional licensing
In addition to the big three requirements, the business must have been in operation for at least two full years. You are still allowed to apply for certification if you have been in business less than two years, but you will have to provide additional evidence to the SBA for consideration. You might be thinking - is there a catch? This actually doesn't sound all that hard (especially if you already have a business plan--most of this information should be documented in there). Well, yes and no. It's not a catch really, but more of a busy-work issue. The 8 (a) DB certification is reviewed annually on your company's certification anniversary. If you fail to provide the required review information to the SBA in the time allotment, the SBA could begin the termination process. Once you lose certification you can not be certified in the program again. So, if this might be something you think would help your business be prepared to give it some attention every year.   Understanding what certification options might be available to your company will arm you with another source of funding and business growth. Has your small business garnered any of these certifications, or do you know of any others we don't mention here?