8(a) certification and the Potential for Success

In Chamber Blog by admin

 

The SBA developed the 8(a) program to level the playing field in federal contracting to offer minority and disadvantaged business owners access to contract opportunities formerly only available to bigger entities. But given this knowledge, did you know that there is a stipulation within the 8(a) certification process that requires you to prove your potential for success in order for your application to be accepted? This provision is an important one if you want in on this program. You see, the SBA doesn’t want to admit businesses into a 9-year program that may not have the ability to utilize the access it provides for many reasons, the biggest being that you must be able to show that you can compete and win contracts and ultimately flourish. 

The Proof is in the paperwork

The SBA has to justify the access to the governing bodies and policy makers that oversee it, and being able to show your ability to succeed to them is just one facet of the process. So how do you prove this? Small businesses are asked to provide letters of credit and financial records that attest to their financial capacity to fulfill contract obligations. For small government contractors, particularly those with under 5 years of business activity and less than 2+years of positive financial gain within their industry will have difficulty providing what is necessary to prove your ability to thrive in this space. 

Interestingly enough, the 8(a) program is not meant for start-ups or businesses that can be deemed successful already. As stated in, The 8(a) Program, A Guide to the SBA’s 8(a) Business Development Program-In Plain English, by Steven Koprince and Nicole Pottroff, there is a “Goldilocks” standard that you have to be “just right” in order to be admitted. You can’t be new to the business if you want to apply for this program and you can’t be too profitable yet either. Sufficient financial success for more than 2 years must be evidenced if you want to be approved. Also, you must show your access to financing and when applicable, good equipment and supplier trade credit capabilities. For a small business this is no easy feat. You cannot walk into your bank and ask for a letter of credit and expect to receive one, so you either need an alternative financing partner that can do so, or impeccable financial records to prove this portion of the process.

Because the demand is so high to have 8(a) businesses actively working a larger portion of government contracts than ever before, the vetting process has become arduous. Going it alone without advice and consultation with legal and financial partners is difficult, so it is best to arm yourself with both before you start your application. If you are denied access for any reason on your first attempt, your next one will be more difficult as the scrutiny will be more harsh because you have already been rejected once. Be sure to align your records and financial data with exactly what is being asked. The process can take more than 6 months to apply if you’ve done the proper due diligence. Although the program was developed to give access to the little guy, it is by no means a small undertaking. Finding experts in GovCon law and finance will be your best allies in this journey, so engage them early and often to maximize your potential for success.


This blog post courtesy of member Teresa Moon, Parabilis