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SBA
8(a) Certification Facts
10 Myths about Certification!
A little knowledge
concerning SBA 8(a) certification can be a dangerous thing. A lack of
knowledge can also be very harmful. Most damaging of all is the incorrect
knowledge or misinformation that EZCertify.com has heard from more than
a few members of the small business community concerning the 8(a) certification.
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, or now self-certify your SDB status and be certified,
even if you've recently formed your business.
The 8(a) Certification
process does include a "Potential for Success" application
criteria, that includes a Length of Time in Business Requirement of
2 full years. What this means is that you must have been in business
for at least 24 months, with revenues in your selected business area
for each of the 2 years preceding the year of your application as evidenced
by your firms Federal income tax returns, or you 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 its 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
Also, what
the SBA or in fact no one else will tell you, is that you can acquire
a business that has been in business for the required 2 years and legally
use this as a basis to meet the two years in business criterion for
8(a) certification.
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 8(a)BD certification.
If you want to read more about this subject, just click
here.
Myth
#2:
"The 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, 488 billion dollars in 2007, is spent on defense, in 2007, there
was more than 169 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. If
you want to read more about this subject, just visit the following web
site. http://www.fpdsng.com/fpr_reports_fy_06.html
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 8(a)
SBA program 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; after you receive your 8(a) certification,
your allowable net worth climbs to the current $750K level)). 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 you and your
spouse are allowed to be divided in half for these net worth calculation
purposes. Further, you may legally transfer certain assets from your
personal property to the applicant firm, if this is done within the
current regulations to reduce your personal net worth, as viewed by
the SBA for 8(a) certification purposes.
There are
2 additional metrics that are used by the SBA to determine whether or
not you are economically disadvantaged in addition to the above adjusted
net worth metric. These are: 1) Your Total Assets, i.e., yours
alone, not that of you and your spouse, if married, must be less than
$4,000,000; 2) Your Adjusted Gross Income (AGI), a metric that you get
from your IRS Form 1040, again for you and not for your spouse, if married,
must have averaged less than $200,000 per year for each of the 2 years
preceding the year in which you apply.
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! According
to IRS statistics, if you have an AGI of $200,000, you are in the upper
98th percentile of all U.S. taxpayers. In short, you dont have
to be impoverished to apply for the 8(a) program.
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:
| Annual Income of Applicant |
Annual Sales of Company |
| $150,000 |
$0 - $1.0M |
| $200,000 |
$1.0M - $2.0M |
| $300,000 |
>$2.0M |
Further, the SBA has a limitation on the total withdrawals that you
may extract from the 8(a) firm in any one year. This number is $300,000
plus the amount needed to pay any Federal and state taxes if you receive
a distribution from the business, such as in the case of an S-corporation
or a limited liability company.
Conclusion:
You can compensate yourself very well while participating in the 8(a)BD
program.
Myth
#5:
"Only small dollar contracts are awarded to 8(a) contractors"
The Facts:
In FY2007, the average 8(a)BD award was $159.9K, versus an
average for all awards of $21.01K. The following table clearly
shows that certified contractors can reap significant rewards from their
participation in these programs.
Contractor
Service/Product Procured
|
Contract Value
|
White Mountain Construction, LLC
Install Mixers in Deicer Tanks
|
$292,820,000
|
JVYS
AH-64D Aircraft Survivability Product Improvement
|
$39,403,999
|
AHTNA Government Services, Corporation
Design, Construction and Integration Services for Radiation Sensors
and Communications Equipment
|
$63,929,374
|
Cazador Apparel, LLC
Air Force Medical Service Initial Outfitting
|
$59,463,515
|
Alutiiq Business Services, LLC
Media Placement
|
$50,000,000
|
MCTECH
Construct an Infrastructure, Warehouse, and Leadership Academy
|
$34,856,679
|
The truth is that 8(a) certified contractors
can be awarded sole-source or noncompetitive contracts of up to $3.5M
each for services and up to $5.5M each for manufacturing efforts. In
the case of 8(a) set-asides or competitive contracts, where only 8(a)
certified contractors are permitted to bid, there are no contract ceiling
limitations, and these contracts can reach into the hundreds of millions
of dollars in size.
Conclusion:
Small business does not necessarily translate into
small-sized contracts.
Myth
#6:
"There is not much business set-aside or awarded to certified
companies"
The Facts:
FY2007 Actual Performance:
Small Business - $83.2B; $20.01K/Award Average
SDB - $24.97B; $80.9K/Award Average
8(a)BD - $13.5B; $149.9K/Award Average
|
Department
|
Small
|
SDB
|
8(a)BD
|
|
Defense
|
$54B
|
$15B
|
$8.5B
|
|
GSA
|
1.6B
|
660M
|
342M
|
|
Energy
|
1.4B
|
542M
|
358M
|
|
Veteran's Affairs
|
3.9B
|
1B
|
470M
|
|
NASA
|
1.9B
|
8843M
|
480M
|
|
HHS
|
2.9B
|
932M
|
499M
|
|
Justice
|
1.7B
|
311M
|
187M
|
|
Agriculture
|
2.5B
|
5633M
|
321M
|
|
Transportation
|
1.5B
|
574M
|
300M
|
|
DHS
|
3.8B
|
1.5B
|
581M
|
Conclusion:
Small, SDB and 8(a) contracting represents more than 25% of all Federal
Government procurements. The average 8(a) contract is 7 times larger
than the typical Federal government contract.
Myth #7:
"Your 8(a) business cannot be owned by a trust, and therefore
if you own the applicant firm through the use of a trust you cannot
apply "
The Facts:
Ownership in an 8(a) firm must be direct. Ordinarily, this direct
ownership requirement prohibits the applicant firm from being owned
by a trust. However, ownership by a trust, such as a living trust, may
be treated as direct ownership if the trust is revocable, and the disadvantaged
individual is the grantor, the sole trustee, and the sole current beneficiary
of the trust.
Conclusion:
An 8(a) firm may be owned and controlled by a trust if the trust
is structured properly such that the disadvantaged individual is the
grantor, the sole trustee, and the sole current beneficiary of the trust.
Myth #8:
"The vast majority of 8(a) applicants get rejected, so why waste
your time?"
The Facts:
If youve heard that applying for the SBA 8(a) Certification is
a waste of time, because most small businesses that do,
fail in their attempts, youre probably right. Its more than
an old wives tale when you hear that 7 out of 10 who apply,
never get certified. Its even worse, when we know that over 90
percent of minority and women-owned small businesses could qualify for
the Federal governments most valuable procurement assistance program.
These businesses could be certified if they only knew why so many others
have failed, and could avoid the traps that are built-in
to the application process. Curious to know why so many companies fail
in their attempts, even after spending months trying their best to navigate
through an application process that is not for the faint of heart?
Heres but a few of the major reasons that most fail.
1. There are no clear instructions, detailing what the SBA is really
looking for. Applicants are left to guess what information will satisfy
the SBA.
2. The SBA checklists that do exist are incomplete, and if you follow
them precisely, you will still fall short.
3. You will have to change your corporate By-Laws, LLC Operating
Agreement, or Partnership Agreement, and the SBA doesnt tell
you how or why, and only tells you, after youve submitted your
application.
4. In order to produce the Economic Disadvantage Narratives required
of all applicants, or the Social Disadvantage Narratives, required
of non-minority women and handicapped applicants, you need the combined
talents of a Johnny Cochran, Tom Clancy and a Sherlock Holmes.
5. The chances of getting your Personal Financial Statement correct,
complete, and in synch with the other financial data that you must
provide, are as good as winning the lottery.
6. Havent been in business for two full years with revenues
and taxes to prove it? The required two-year waiver narrative,
that attempts to convince the SBA that your potential for success
is a sure thing, is equivalent to writing a letter to
Saint Peter, trying to convince him that you are an angel on
earth.
7. Try your best to force-fit what your company does into an admittedly
imperfect NAICS code system, and the SBA will insist on seeing your
professional license, even if your profession doesnt require
one.
8. Unless you have or put your company governance paperwork (e.g.
meeting minutes, agreements, loans, etc) in total order, and have
an explanation for every type of financial transaction that just
happens in small business operations (e.g. shareholder loans,
owner compensation issues, etc.), be prepared to be challenged by
the SBA.
We, at EZCertify.com see countless letters from the SBA to small
businesses, who have either been rejected outright or have received
a laundry-list of so-called deficiencies to respond to.
We have developed a family of responses to each of the above reasons
and countless others that continue to plague qualified applicants
for the 8(a) Program, for example:
1. We know precisely what the SBA is looking for, and we automatically
produce the required attachments to your application with the needed
explanatory data.
2. We go beyond what is requested in the SBAs checklist, providing
our clients with the information that the SBA will ask for, anticipating
their needs, and saving our clients months of unnecessary delay or
rejection.
3. We provide Economic and Social Disadvantage Narrative Work-Packages,
that help jog the memories of our clients to the incidents of bias
or prejudice that they have experienced, and we provide real-life,
successful examples of narratives, so that our clients will see just
what these narratives must contain.
4. We provide easy-to-use financial data collection worksheets
that automatically generate and populate the required Personal Financial
Statements and eliminate all inconsistencies and mathematical errors.
5. We provide a Length-in-Time Work-Package that is easy to understand
and complete, and that produces a draft of the infamous request
for two-year waiver document, addressing all five factors required
by the SBA to prove your potential for success.
6. We ensure that the NAICS code that is selected to represent your
companys work experience will be seen as representing what your
company actually does to the SBA.
7. We will rewrite your By-Laws, Operating Agreements or Partnership
Agreements, or tell you precisely what they must contain to satisfy
the SBAs suspicions that you really run your business,
and will ensure that all company organizational, financial and other
information required is provided in the correct form, and it all hangs
together.
Conclusion:
You see, applying for the SBA 8(a) Certification need not be
a waste of time, or of your money, or of your precious psychic energy.
Myth #9:
"Women and other non-designated minority business owners and Service-Disabled
Veterans can't easily prove their social disadvantage and consequently
can't be certified"
The Facts:
First, businesses owned and controlled by
members of the following designated groups are already presumed to be
socially disadvantaged:
Black Americans
Asian Pacific Americans
Hispanic Americans
Subcontinent Asian Americans
Native Americans,
and are left to prove their economic disadvantage
only.
Second, non-minority women, Service-Disabled
Veterans and others (those who are not members of one of the above designated
groups), can, under a much more relaxed evidentiary standard used to
prove your social disadvantage, termed preponderance of the evidence
, can more easily prove their social and economic disadvantage. This
proof takes the form of a narrative in which you 1) Identify the timeframe
in which you believe that you experienced discrimination or bias, based
on your distinguishing feature, e.g., gender, handicap, ethnicity.
etc., 2) Identify those persons and organizations that committed the
prejudice or bias against you, 3) Describe the incident during which
you were exposed to this bias by identifying what was said or done to
you that you believe was a direct result of your distinguishing
feature, and 4) Describe and quantify the damage to your ability
to get prepared for, to enter or to succeed in your chosen business
career. These events of bias or prejudice can have occurred anytime
during your life here in the United States. The door to proving your
social or economic disadvantage has been opened by the change in the
evidentiary standard and also by EZCertify.com, which provides a roadmap
and associated real-life examples of successful social and economic
claims by persons, not members of the designated groups. If you want
to read more about the subject of social or economic disadvantage, just
visit the following link
(For the social disadvantage) and this link
(For the economic disadvantage)
Conclusion:
Successfully claiming and proving your social or economic disadvantage
is no longer a "virtual mission impossible."
Myth #10:
"You cant afford to
pay for the professional assistance to be successfully certified only
to be rejected by the SBA and lose your entire investment of money and
time."
The Facts:
Prior to EZCertify.com, this myth was "right
on". However, with EZCertify.com, today is a different matter.
Here are some facts for you to consider:
a. First of all EZCertify does not accept
any clients for the 8(a) certification that we are not sure can be successfully
certified.
b. Second, we pre-qualify all candidates for
certification up-front, minimizing the time to discover whether or not
you are qualified for this certification.
c. Third, we know what the SBA is looking
for in your application, even if they dont ask you for this information
up front, avoiding your slow and painful discovery of what they need
to see in your application after months of back-and-forth challenges
and requests for additional data from you.
d. Fourth, we respond to any and all SBA challenges
and requests for additional or clarifying information, at no additional
cost to you.
e. Fifth, we take on 100% of the responsibility
for preparing a successful certification application. You provide the
raw data and we ensure your certification.
f. Sixth, we charge for our services on a
firm-fixed price basis. There are no hidden extras regardless
how complex your case may be. You know the total investment level before
we agree to work together.
g. Seventh, we do not submit an application
until we know that it will be accepted by the SBA, usually on the first
submission of your application.
h. Eighth, we provide a conditional
money-back guarantee that depends only on the timely provision
of readily available data from you and your total up-front honesty
in answering a few questions that you are asked to verify up-front.
i. Ninth, we provide the conditional
money-back guarantee in writing, right up-front so that you can see
what youre getting into before you commit any investment at all
to your application.
j. Tenth and finally, we dont stop working
on your behalf until you are successfully certified, understand the
8(a) program, Federal government procurement and your commitments to
continue to be eligible to participate in the 8(a) program for the entire
9 year term of your participation.
Conclusion:
Getting certified using the EZCertify team of national experts, saves
you time, worry and essentially ensures your certification, all backed
by our conditional money-back guarantee. If you want to
read more about this subject, just click
here.
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