8a Application Avoid the Two Unfixable Errors

As consultants we get calls from people that say to us.  “I need immediate help my 8(a) application is in trouble!  Obtaining 8(a) is critical for my business, there is a major contract I can get if I am 8a!”  We then look into the SBA’s response for the application and many times there is no way to fix the application.  

Below are the two areas that cannot be appealed to the OHA as they do not have jurisdiction over the denial. 

1. The applicant does not meet the SBA’s standards for having “good moral character.”
2. The applicant firm does not meet the SBA’s potential for success threshold.

Good Moral Character - If any owner of the firm who possesses more than a 10 percent ownership stake is found not to have good moral character the firm will be declined.  This is different from the Social Disadvantage and Economic Disadvantage thresholds where it is only the 51% owner that is considered for those parts of the application process.

Issues that can cause a denial for Good Character:  Adverse information regarding criminal conduct, Violations of any SBA regulations, Debarred or suspended firms, Debarred or suspended persons, Submission of false information during the application process or after approval, Lacks business integrity (i.e. any legal issues such as indictments, guilty pleas, convictions, judgments, settlements), Is currently incarcerated or on parole or probation (either pre-trial or following conviction for felony or any crime involving business integrity)

Potential for Success – In general to demonstrate potential for success the firms must be in business in its primary industry classification for at least two full years (evidenced by tax returns) immediately prior to the date of its 8(a) application.  In addition the firm must also have other characteristics as well, currently profitable, a positive net worth, access to capital, technical knowledge in the industry of the primary owner, 51% owner must have licenses or certifications needed to run the business, full time devotion of the primary owner, and a federal market in which to serve with its products or services. 

If the firm does not have two years in business then the firm must be able to demonstrate that the owner of the firms has substantial business management experience in the industry in which the firm is applying.  The firm also needs to show that it has been successful by having a substantial amount of revenue generally over $160,000 as well as being profitable.  When a firm needs a two year waiver in order to apply the SBA is more thorough in its analysis in its determination of potential for success. 

Because these three items are not subject to OHA appeal it is very important that a firm meet the SBA’s thresholds in these items prior to submitting their 8(a) application.