Presented by The Capital Group and Berenzweig Leonard
The SBA is no longer permitting most applicants to the 8(a) Business Development Program to establish their eligibility based on the rebuttable presumption of social disadvantage. Instead, the SBA is now requiring business owners to prove that they have faced racial, ethnic, or cultural discrimination or bias due to their social background in order to maintain or obtain the 8(a) status.
This change is the result of a recent court decision that held that all 8(a) Business Development Program applicants should prove their social disadvantage instead of some applicants having their social disadvantage automatically assumed because of their race. The change means that if you are an individual who owns a small business and wants to participate in the 8(a) Business Development Program, you now must demonstrate that you have experienced discrimination or prejudice based on your race, religion, ethnic origin, gender, sexual orientation, or identifiable disability. It is important to note that this decision does not apply to entity-owned firms, such as firms owned by Native American tribes, Alaska native corporations, native Hawaiian organizations, or community development organizations. Additionally, owners who have already been admitted to the program through submission of a social disadvantage narrative are not impacted by this change.
Here are several steps you can take to remain or become compliant with the new SBA 8(a) Business Development Program requirement:
CURRENT PARTICIPANTS:
KNOW WHERE YOU STAND
Nothing is required at this time if you were admitted to the program because the qualifying owner(s) established his or her social disadvantage by proving beyond a reasonable doubt that he or she was socially disadvantaged. However, be prepared to provide evidence of your eligibility if asked to present it again.
ADMITTED UNDER PRESUMPTION
If you were admitted under the presumption of social disadvantage, you should have received a notification from the SBA asking you to submit a social disadvantage narrative.
- If you have to submit a narrative, the SBA requires that the narrative contain a thorough description of two occurrences that demonstrate that your social disadvantage is ongoing, chronic, and substantial.
- It is important that these instances demonstrate a negative impact on your ability to enter and succeed in the business world.
- Types of discriminatory incidents that could be included in the narrative include:
- Discrimination in education, such as a denial of equal access to higher education institutions.
- Discrimination in employment, such as unequal treatment in hiring, promotion, or pay.
- Discrimination in business history, such as unequal access to capital or credit.
- For more guidance and examples: SBA’s Guide for Demonstrating Social Disadvantage.
REVIEW YOUR ELIGIBILITY
Check to ensure that you still meet the eligibility criteria for the program. Make sure that you are able to demonstrate how you have faced significant obstacles due to your social background.
PREPARE YOUR STATEMENT
When drafting your statement for the SBA, be sure to use any paperwork, documentation, or evidence that supports your claim of social disadvantage, including any discriminatory or prejudicial treatment you have experienced over time. The types of documents that may be helpful include employment records, academic transcripts, and copies of business contracts that highlight your struggles.
CHECK PROGRAM POLICIES AND GUIDELINES
Review the SBA 8(a) Business Development Program policies and guidelines for the updated requirements and any other eligibility criteria you should know about. Take note of any changes and consider how they may impact your business.
REACH OUT TO YOUR BUSINESS DEVELOPMENT SPECIALIST
If you have questions or require assistance in navigating the new guidelines, reach out to your designated business development specialist or the SBA District Office for clarification and guidance.
IMPORTANT
- Your justification must be submitted to, reviewed, and approved by SBA headquarters, not your local district office.
- Until an affirmative finding of social disadvantage is made, no 8(a) contracts may be awarded to the current Participant.
- Once you receive the affirmative finding of social disadvantage, no additional determination will be required.
By taking these steps to help ensure compliance with the new requirement, you can be positioned to remain eligible for the 8(a) Business Development Program and continue receiving its benefits.
PROSPECTIVE PARTICIPANTS:
USE EXISTING NARRATIVE PROCESS
When drafting your social disadvantage narrative, include (1) your identity or identities that are the basis of your disadvantage, and (2) thorough descriptions of situations in which you have experienced discrimination based on your identity or identities.
- The discriminatory experiences should be connected to your employment history, your business history, or your education history,
- To ensure that your narrative is thorough, it is best to include the who, what, when, where, and how of each situation.
ASSESS PERSONAL HISTORY
Determine whether you can demonstrate significant obstacles due to your social background. This could include exploring educational background, work history, and personal experiences of discrimination, as well as any other factors that contribute to your social disadvantage.
GATHER SUPPORTING DOCUMENTATION
Gather all relevant supporting documentation that demonstrates your social disadvantage, including education records, employment records, and any documentation related to past discrimination you may have experienced.
SEEK ASSISTANCE
The SBA or other qualified professionals, including specialized business consultants, can help guide you through the application process and ensure that you provide all necessary information and documentation.
PLAN FOR MONITORING
Once accepted into the program, it is important to continue to monitor compliance with the eligibility requirements, including demonstrating ongoing social or economic disadvantage, and seeking assistance when needed.
Remaining compliant with the eligibility requirements is critical for 8(a) Participants to continue to compete for 8(a) contracts. Participating in the 8(a) program comes with many benefits. However, non-compliance can lead to penalties, suspension, or termination from the program. Failure to meet program rules can have a negative impact on the company’s reputation.
QUESTIONS?
It is important to understand that the SBA’s compliance requirements may change, and businesses should monitor for new regulations and guidance from the SBA.
For more information on 8(a) regulatory updates and requirements contact us at:
The Capital Group: 301-214-7666 | Info@CapGroupFinancial.com
Berenzweig Leonard: 703-760-0402 | SWilson@BerenzweigLaw.com
This material has been prepared for informational purposes only. BRP Group, Inc. and its affiliates, do not provide tax, legal or accounting advice. Please consult with your own tax, legal or accounting professionals before engaging in any transaction.