SBA 8(a) Certification Facts

 10 Myths about Certification!

A little knowledge concerning SBA certification can be a dangerous thing. A lack of knowledge can also be very harmful. Most damaging of all is the incorrect knowledge or mis-information that EZCertify.com has heard from more than a few members of the small business community concerning the SDB or 8(a)BD certifications. Left unchallenged, these misunderstandings grow into myths that are perpetuated, exaggerated and become the "pseudo-reality" of how the small business community, many of which are qualified to be certified, think about and act upon the SBA's certification process. Here are just ten of these myths that we've heard and a few of the facts and conclusions about each:


Myth #1:
"You have to be in business for two years before applying"

The Facts:
There is no "time in business requirement" for the SDB certification. You may apply and be certified, even if you've recently formed your business.

The 8(a)BD Certification process does include a "Potential for Success" application criteria, that includes a Length of Time in Business Requirement of 2 full years... or an applicant may seek a waiver by addressing the following factors:

1. Substantial business management experience of the individual(s) upon whom eligibility is based;
2. Information that the applicant concern has demonstrated technical experience to carry out its business plan with a substantial likelihood for success if admitted to the 8(a)BD program;
3. Information to demonstrate that the applicant concern has adequate capital to carry out the business plan as a Participant;
4. Information that documents the applicant concern's record of successful performance on contracts from governmental and/or non-governmental sources in the primary industry category; and
5. Information that demonstrates that the applicant concern has the ability to timely obtain the personnel, facilities, equipment and any other requirements needed to perform contracts as a Participant

In short, if you are an experienced businessperson, with a business plan, have sufficient funds to support your business operations, previous or current contracting experience and possess a few of the basic building blocks of a successful business, you can be granted a waiver of the "2-year rule."

Conclusion:
Your length of time in business need not prevent you from SDB or 8(a)BD certification.

Myth #2:
"Federal Government doesn't purchase what my business sells"

The Facts:
The Federal Government is the single largest customer in the entire world. The closest analogy is that it resembles an international, mega-corporation, with its various departments and agencies involved in just about any facet of life imaginable. Whereas a large portion of the Federal procurement budget is spent on defense, in 1998, there was more than 57 billion dollars in contracts awarded by civilian agencies (e.g. Energy, NASA, GSA, Transportation, etc.). Even in the case of defense spending, a significant percentage is spent on non-weapon associated items, such as automatic data processing equipment and services, communication equipment and services, fuels, office supplies, medical services, clothing, etc. Congress ensures that this spending is also spread out across the entire country, with military bases, agency installations and large prime contractors located in every state and territory in the U.S.

Conclusion:
The Federal Government purchases virtually everything at thousands of locations nationwide.

Myth #3:
"Most small business owners are too wealthy to qualify"

The Facts:
The financial metrics that qualify an applicant for either of the two SBA programs are quite generous. For example, the SDB program sets a standard of a $750K net worth versus the $250K net worth for the 8(a)BD program (at time of application). In reality, even this "net worth" is an adjusted number. The SBA subtracts the equity held in the applicant's primary residence, as well as the value of the applicant's holdings in their business from the classical net worth calculations. Also, any assets held jointly by an applicant and their spouse are allowed to be divided in half for these net worth calculation purposes.

According to an Urban Institute study, non-minority men and women business owners have an average net worth of less than $100K and $50K respectfully, whereas minority men and women's net worth's are even less!

Conclusion:
The vast majority of small business owners can readily prove their economic disadvantage.

Myth #4:
"You can't pay yourself well and also be certified"

The Facts:
There are no regulatory requirements establishing maximums for the income of an applicant for either the SDB or 8(a)BD programs, although income is one of several factors used to determine their economic disadvantage. You're probably safe under the following conditions:

Conclusion:
You can compensate yourself very well while participating in the SDB or 8(a)BD programs.

Myth #5:
"Only small dollar contracts are available to certified contractors"

The Facts:
In FY98, the average 8(a)BD award was $66.46K, versus an average for all awards of $15.79K.   The following table clearly shows that certified contractors can reap significant rewards from their participation in these programs.

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