THE SMALL BUSINESS ADMINISTRATION'S 2-YEAR RULE
A two-year waiver comes standard with our full service 8(a) Application Package (therefore this service is not needed for most clients applying using the waiver), but we do preform this service with our 8(a) Application Review Service and as a standalone service. Approximately 20% of clients using our 8(a) Full-Service Application Package are applying using this SBA waiver. Many of these firms undertake the Future 8(a) Planning Strategy with us in order to make sure they setup their business in a way to obtain 8(a) in the least amount of time possible. We highly recommend this planning if time is of the essence in getting the 8(a) certification for your firm.
Quick Acid Test for Two Year Waiver Eligibility
If you fulfill the following four criteria and meet all other requirements for 8(a) it is highly likely your firm can move forward with a 2-year waiver.
- The firm has at least one tax return with revenue and a profit.
- The firm has a positive net worth.
- The owner of the firm works full-time for the business (meaning Monday-Friday 9am-5pm)
- The firm has at least $150,000 in revenue since the firm’s inception.
*If you meet these four criteria then talking through the specifics of your given situation is the most logical next step.
When Applying with a 2-Year Waiver can be an Advantage
For some firms it can be advantageous to apply early using the two-year waiver. This is because for firms applying early the SBA often waives the 70% rule. The means that not more than 70% of the firm’s revenue can come from a single source on a rolling 12-month basis. Therefore, if your firm only has one client applying early with a 2-year waiver maybe your best strategy for obtaining 8(a) in the shortest amount of time.
About the SBA 2-Year Waiver
SBA 8(a) Business Development program regulations state that "an applicant concern"—a business applying for 8(a) status—must possess reasonable prospects for success competing in the private sector before it can be admitted into the 8(a) federal contracting program.
In order to demonstrate that the company possesses the required "potential for success", an applicant firm must meet several basic criteria, one of which is the 2-year Rule.
Because many young businesses fail before they reach 2 years of age, the SBA uses the "2 or more years in business" rule to measure its potential for success as an indicator of whether or not an 8(a)-applicant firm will continue to survive and succeed within the 8(a) program.
An applicant firm can satisfy this requirement by submitting copies of federal tax returns to prove it generated revenues within its primary industry during the two most recent years prior to the date of its 8(a) application.
Elements of the 2-year Waiver
If your firm has not been in business for 2 or more years, it can still satisfy the SBA's "potential for success" requirement and gain entry into the SBA 8(a) program if it qualifies for a waiver of the 2-year rule.
The Small Business Administration, unfortunately, does not provide extensive written guidance regarding how a length of time in business waiver request should be written.
The five waiver criteria—as specifically stated by the SBA, using their own language—are as follows:
- The individual or individuals upon whom eligibility is based must have substantial business management experience.
- The applicant firm must demonstrate the technical experience to complete its business plan with a substantial likelihood for success.
- The applicant firm must have adequate capital to sustain its operations and carry out its business plan.
- The applicant firm must have a record of successful performance on contracts from governmental or non-governmental sources in its primary industry category.
- The applicant firm must have or must be able to demonstrate that it can timely obtain the personnel, facilities, equipment and any other requirements needed to perform on contracts if it is admitted to the 8(a) program.
Two Year Waiver Package
For each category required in the 2-year waiver ez8a will assist and guide you with the following:
- As part of our process, we will consult with you as well as review your resume regarding your current and previous roles held throughout your career. We then focus on breaking out your managerial experience in a format that will satisfy the SBA’s requirements.
- We will also look at any related education/training/certificates/licensing held in your specific industry and assist in explaining all your technical experience in a way that will best satisfy the SBA’s requirements.
- As part of this package, we will review your current and prior financial statements to help demonstrate to the SBA an adequate capital position. We will assist in presenting your capital position in most likely to satisfy the SBA’s requirements. If needed, we will make suggestions for gaining additional capital in order to show the company in a more positive cash position. Our ample experience in the waiver process gives us the ability to suggestions what the SBA is likely to accept.
- We will consult with you as well as review your current and prior contracts in order to summarize your company's past performance for the SBA.
- The industry in which you are receiving your billing is an important part of the 2-year waiver process. We will identify which NAICS code best represents the business in which you are transacting.
- We will consult with you regarding all other firm data. This will go into your current personnel, business location, equipment, and other resources on hand. We will also provide guidance and assist in explaining to the SBA ways in which you can go about securing additional resources for the future. The SBA needs assurance that you have the resources necessary to be a viable, stable business. Additionally, the SBA wants to see that you have a growth plan and processes in place so that you can manage a large incoming federal 8(a) contract if awarded. We will present this information in the format that is most likely to satisfy the SBA’s requirements.
Two Year Waiver Fee: $1,100.00
Future 8(a) Planning Strategy: $1,000.00