No discussion of opportunities for small businesses would be complete without a brief discussion of eligibility of some of the significant special programs – namely the 8(a), small disadvantaged and new HUBZone program (discussed in detail in GCA DIGEST Vol. 1, No. 4).

Restricted to small businesses owned and controlled by socially and economically disadvantaged individuals, economically disadvantaged Indian tribes and economically disadvantaged Native Hawaiian organizations.  The SBA regulations contain extensive definitions of these individuals.  A prescribed test for designation as socially disadvantaged requires individuals to have been subjected to racial or ethnic prejudice or cultural bias because of their identities as members of groups without regard to individual qualities.  Black, Hispanic and Native (including American Indians, Eskimos, Aleuts or Native Hawaiians) Americans are classified as “socially disadvantaged individuals.  Individuals not members of the above designated groups must establish their individual social disadvantage by a preponderance of the evidence  and must show (1) one objective distinguishing feature that has contributed to social disadvantage (2) personal experience of a substantial and chronic social disadvantage and (3) negative impact on entry into or advancement in the business world.

In addition, applicants are ineligible if the net worth of the individual upon whom eligibility is based exceeds $250,000, excluding personal residence and ownership interest in the business.  Also the firm must have been in operation for two years in its primary industry classification before acceptance into the program and must possess potential for success based upon such factors as financial capability and record of performance.  Rules preventing potential abuse include: (1) financial statements of  spouses of applicant must be included in application (2) once accepted, the net worth of the individual must continue to be less than $750,000 during the period in the program (3) applicant or other socially disadvantaged individuals must unconditionally own 51% of the business and they must not own more than 20% equity ownership of any other 8(a) concern (4) the business must be managed by a disadvantaged individual who has either managed or has technical competency in the applicable industry (5) eligibility may be used only once where neither the firm or individual can re-enter the 8(a) program and (6) new owners must also be socially disadvantaged and new participants will require SBA approval for the firm.  Extensive penalties including jail terms and fines, may be imposed if you misrepresent your firm’s status.

If accepted, a firm may remain in the 8(a) program for nine years.  During the first four years, you must make all reasonable efforts to attain a targeted dollar level of non-8(a) revenue while in the last five years, you must achieve non-8(a) revenue ranging from 15% in year five to 55% in year nine.

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