By Andrew Miller
The Small Business Administration issued a final rule on August 11 changing who can qualify for the 8(a) Business Development Program. It takes effect September 10.
A quick primer, because 8(a) is often misunderstood.
It isn’t a loan program. It certifies small businesses so they can compete for federal contracts the government has set aside. In some cases, they can even receive contracts without competitive bidding.
For firms that sell to the government, certification is the door.
Getting certified requires the owner to clear two separate tests. Economic disadvantage, which uses net worth and income limits. The second test, for social disadvantage, is what’s changing.
For decades, members of five racial and ethnic groups were automatically presumed socially disadvantaged. Everyone else could still qualify, but had to prove it.
A federal court struck down that automatic presumption in 2023. The SBA required written personal narratives instead. Those stopped being accepted in January.
To be eligible going forward, an applicant has to document that a government body, university, or corporation discriminated against a definable racial, ethnic, or cultural group, or favored a group the applicant is not part of. Sex-based discrimination counts too.
The discrimination has to have occurred within the applicant’s lifetime, and it does not have to involve the SBA or even involve business. A university admissions policy qualifies. So does a corporate pay practice.
Then the applicant certifies two things: that they belong to the affected group, and that the discrimination materially harmed them. In other words, it cost them economic opportunity or held back their entry into business.
There’s no longer a list of presumed disadvantaged groups. Anyone can apply, including people who were never eligible for the old presumption, as long as they can prove it.
Documenting that proof is where things get murky.
So far, the SBA hasn’t said what it’s supposed to look like.
The rule points toward published policies, official statements, audits, reports, and court decisions. It also allows other adequate evidence when those aren’t available, but never says what that means. And it sets no threshold for how many instances are enough.
The previous narrative requirement is gone. The burden of proof is not.
P.S. Signet Capital Group works with small businesses on funding, whatever door they’re trying to get through. Let’s talk about your options.