New 8(a) Economic Disadvantage Requirements Kick In July 15
In May, we wrote about the U.S. Small Business Administration's ("SBA") long-awaited final rule amending its regulations for the Women-Owned Small Business Program (third-party certification). Notably, through that final rule, SBA also amended certain 8(a) Business Development Program ("8(a) Program") requirements, which take effect on July 15, 2020.
These additional changes harmonize the 8(a) Program and EDWOSB requirements that were the subject of scrutiny because of differing economic disadvantage thresholds. Previously, a small business seeking status as an EDWOSB and certification to the 8(a) Program simultaneously could be found economically disadvantaged under the former but not under the latter. SBA fixed the "confusion and uncertainty" the discrepancy caused by changing the 8(a) Program thresholds to provide consistency among both programs.
Beginning on July 15, the 8(a) Program requirements, generally, will be as follows (the bold text reflects SBA's recent amendments):
Be a small business (under the size standard for its primary industry) that has not previously participated in the 8(a) Program
Be a company is at least 51% owned and controlled by U.S. citizens who are of good character and who are economically and socially disadvantaged
Be a company that demonstrates potential for success
The owner manages the day-to-day operations and makes long-term decisions of the company
Be owned by someone whose net worth is under $750,000
Be owned by someone whose average adjusted gross income for three years is under $350,000
Be owned by someone with assets (fair market value) under $6 million
Notably, SBA's final rule also removed the dual initial and continuing eligibility thresholds under the 8(a) Program's economic disadvantage regulations and excluded retirement accounts from calculations of an economically disadvantaged person's net worth (regardless of age). [1]
For more information on SBA's 8(a) Program, including some of the benefits thereunder and its regulatory framework, check out the following webpages:
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[1] In other words, SBA's final rule provides for a singular threshold (bold text above) and removed the following dual thresholds: net worth – $250,000 initial and $750,000 continuing; adjusted gross income – $250,000 initial and $350,000 continuing; and fair market value of assets –$4 million initial and $6 million continuing).
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