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December 5, 2008

Update: SBA 8 (a) FAQs

What is the Small Business Administration and why was it set up?

The SBA was established on July 30, 1953, by the United States Congress with the passage of the Small Business Act. Its function was to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” Also stipulated was that the SBA should ensure a “fair proportion” of government contracts and sales of surplus property to small business. The SBA also makes loans directly to businesses and acts as a guarantor on bank loans. In some circumstances it also makes loans to victims of natural disasters, works to get government procurement contracts for small businesses, and assists businesses with management, technical and training issues.The SBA has directly or indirectly helped nearly 20 million businesses and currently holds a portfolio of roughly 219,000 loans worth more than $45 billion making it the largest single financial backer of businesses in the United States.

What is the SBA 8 (a) program?

The SBA 8(a) Business Development (BD) program is a 9-year program designed to assist socially and economically disadvantaged individuals in gaining access to the resources necessary to develop small businesses. Gaining access to the 8(a) program is intended to help to level the playing field for minority businesses by offering services such as: extensive assistance in business planning, loan guarantees, federal government contracts, assistance in contracting opportunities outside of the SBA, training and technical support, and surplus federal government property. In addition, 8(a) Program participants are eligible to participate in the SBA’s Mentor-Protégé Program. Overall, the goal is to improve the opportunities of disadvantaged firms to compete on an equal basis in the mainstream of the American economy.

What is 8 (a) minority group status and what groups have it?

The SBA defines socially disadvantaged groups as those whose members are subjected to racial or ethnic prejudice or cultural bias because of their identity as members of that group. Social disadvantage must stem from circumstances beyond their control. In the absence of evidence to the contrary, individuals who are members of the following designated groups are presumed to be socially disadvantaged:

  1. African Americans
  2. Hispanic Americans
  3. Native Americans (American Indians, Eskimos, Aleuts, and Native Hawaiians)
  4. Asian Pacific Americans (persons with origins from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam, U.S. Trust Territory of the Pacific Islands [Republic of Palau], Commonwealth of the Northern Mariana Islands, Laos, Cambodia [Kampuchea], Taiwan; Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the Marshall Islands, Federated States of Micronesia, Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru
  5. Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal)
  6. Women

How can individual small business owners who are not members of a designated minority group apply for SBA 8 (a) benefits?

Firstly, an individual who is not a member of a designated group must establish social disadvantage evidenced by at least one objective distinguishing feature beyond their control that has contributed to social disadvantage, such as race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar causes not common to individuals who are not socially disadvantaged. Among these are personal experiences of social disadvantage stemming from the aforementioned distinguishing feature or features. Moreover, the experiences must have been in American society, not in other countries, and must have been substantial and chronic.

Generalized patterns of discrimination or statistical data may be used to augment an individual’s case. However, statistics and generalized patterns are not sufficient by themselves to establish a case of individual social disadvantage. An individual’s statement of personal experiences may only in combination with the generalized evidence be sufficient to demonstrate social disadvantage.

Accepted documentary evidence which corroborates or supports assertions made by an owner regarding specific incidents or a pattern of discrimination includes: personnel records, payroll records, rejection letters on job applications, denials of credit applications, documents relating to rejected contract offers, i.e., bid abstracts, solicitations, etc., contemporaneous records memorializing meetings, conversations, negotiations, telephone calls, etc. , and documents setting forth company policy(ies) which are alleged to be discriminatory.

Secondly, the firm must be 51% owned and controlled by the applicant: who in turn must be a U.S. citizen in good standing. Moreover, applicants must be in business for at least two years before applying, and have a personal net worth of less than $250,000. The SBA will also consider the individual’s average two-year income, fair market value of all assets, access to credit and capital, and the financial condition of the applicant firm in evaluating economic disadvantage.

The SBA determines whether or not applicant has proven social disadvantage caused by factors beyond his/her control on the basis of a “preponderance of evidence“; i.e. documents which leads the SBA to conclude, objectively, that the existence or truth of the fact(s) asserted is more probable than not.

What are the benefits of 8 (a) minority group status?

Small business owners who fall under a designated minority group are not required to establish social disadvantage on the basis of a “preponderance of evidence” when applying for SBA benefits. Discrimination is already assumed by the SBA, thus significantly improving the prospects of being awarded federal contracts. In other words, members of communities that enjoy 8 (a) group status have far easier access to billions of dollars of federal contracts and services earmarked for disadvantaged minorities.

How can an unrecognized ethnic community gain 8 (a) minority group status?

Representatives of an identifiable group whose members believe that the group has suffered chronic racial or ethnic prejudice or cultural bias that has contributed to economic deprivation may petition the SBA to be included as a socially disadvantaged group. Upon presentation of substantial evidence that members of the group have been subjected to racial or ethnic prejudice or cultural bias because of their identity as group members and without regard to their individual qualities – ultimately leading to communal economic deprivation – SBA will publish a notice in the Federal Register that it has received and is considering such a request, and that it will consider public comments. In order to assess the group petition, the SBA must determine that:

(i) The group has suffered prejudice, bias, or discriminatory practices

(ii) Those conditions have resulted in economic deprivation for the group

(iii) Those conditions have produced impediments in the business world for members of the group over which they have no control and which are not common to small business owners generally.

After going through the petition, public comments, and relevant research, the SBA will advise the petitioners of its final decision in writing, and publish its conclusion as a notice in the Federal Register. Finally, the SBA will amend the list of communities designated group status under the 8 (a) program to include the new group.

SBA 8 (a) STATISTICS

In 2006, the Department of Defense awarded more than $14.6 billion in prime contracts to small disadvantaged and 8(a) firms, representing more than 6 percent of its total procurement spending and exceeding the 5 percent statutory goal.

The Washington Technology newspaper showed that the top SBA 8 (a) contractor in 2007, Anchorage-based Nana Regional Corporation Inc, generated $178,619,085 in 8 (a) revenue. A list of the top-25 8 (a) firms in the technology sector in 2007 can be found by clicking here.

 

 

 

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