THE MOST FREQUENTLY ASKED QUESTIONS 2/97 ABOUT THE 8(a) PROGRAM U.S. Small Business Administration Office of Minority Enterprise Development 409 3rd Street, S.W.--8th Floor Washington, D.C. 20416 1. QUESTION: What is the 8(a) program? The 8(a) program name is from Section 8(a) of the Small Business Act. The Act, as amended by Congress, created the 8(a) program so the U.S. Small Business Administration (SBA) could help small companies owned and operated by socially and economically disadvantaged persons develop their businesses. One of the business development tools of the 8(a) program is the award of Federal contracts. Under the program, SBA acts as a prime contractor and enters into contracts with other Federal Government departments and agencies. In its role as a prime contractor, SBA awards subcontracts for their performance by certified companies. 2. QUESTION: How do I apply to the 8(a) program? The first step in seeking certification with the 8(a) program is to contact the local SBA district office serving your area. An SBA representative will answer general questions over the telephone and set up an appointment with you to go over the various application forms. The following forms and documentation are required to be submitted for an eligibility determination: (1) SBA Form 1010A, 8(a) Personal Eligibility Statement (2) SBA Form 1010B, Business Eligibility Statement (3) SBA Form 413, Personal Financial Statement (4) SBA Form 912, Statement of Personal History (5) SBA Form 4506, Request for Copy of Transcript of Tax (6) SBA form 1623, Certification Regarding Debarment, Suspension and Other Responsibility Matters (7) FD 258, Fingerprint Card (if indicated) (8) Business Organization Information (9) Federal Income Tax Returns (personal and business) (10) Business Financial Statements (11) History of the Business (12) Organization Chart (13) Resumes (14) Financing Arrangements (15) Bonding Information (16) Arrangements for Business Premises (17) Arrangements for Business Equipment (18) Licenses (19) Management, Consulting or Other Agreements (20) Schedule of Business Insurance (21) Information Regarding Affiliates 3. QUESTION: Do I need someone to prepare my 8(a) application package? Will I increase my chances of being approved if I use a specific business consultant? You do not need to pay anyone to prepare your 8(a) application. SBA designed the application forms so the applicant can complete the application. However, a consultant can assist in completing the application. Please be advised that no one can guarantee that an application for 8(a) program participation will be approved. The application process is intended to assure that each applicant receives a fair, unbiased review, free from favoritism and influence. Any irregularities in the application review process should be immediately referred to the SBA Inspector General. 4. QUESTION: Who are socially and economically disadvantaged individuals? Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identities as members of groups without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control. In the absence of evidence to the contrary, the following individuals are presumed to be socially disadvantaged: Black Americans; Hispanic Americans; Native Americans (American Indians, Eskimos, Aleuts, and Native Hawaiians); Asian Pacific Americans (persons with origins from Japan, China, the Philippines, Vietnam, Korea, Samoa, Guam, U.S. Trust Territory of the Pacific Islands [Republic of Palau], Commonwealth of the Northern Mariana Islands, Laos, Cambodia [Kampuchea], Taiwan; Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Republic of the Marshall Islands, Federated States of Micronesia, Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru; Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal); and members of other groups designated from time to time by the SBA. In addition, an individual who is not a member of one of the above-named groups may apply for 8(a) certification. However, the applicant must establish social disadvantage on the basis of clear and convincing evidence. Economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities, as compared to others in the same or similar line of business and competitive market area who are not socially disadvantaged. For purposes of program entry, an individual whose personal net worth (excluding the equity in their personal residence and business) exceeds $250,000 will not be considered economically disadvantaged. 5. QUESTION: Can a woman-owned business be certified as an 8(a) firm? A woman-owned business may be recognized as a "socially disadvantaged firm" if the owner is a member of one of the groups for which social disadvantage is presumed. If the woman is not a member of one of the groups for which social disadvantage is presumed, she must establish her individual disadvantage on the basis of clear and convincing evidence that she has suffered discriminatory treatment because of her gender and that this treatment has impeded her entry into or advancement in the business world. SBA will consider any pertinent evidence but will give particular attention to evidence of discriminatory practices suffered in the areas of education, employment and the business world. 6. QUESTION: What is a SIC code? A SIC code is the Standard Industrial Classification number listed in the Standard Industrial Classification Manual which is published by the Office of Management and Budget. SIC codes are used by the Federal Government to identify and classify specific categories of business activity that represent the primary line of business of a firm. SBA size standards are based on SIC codes. 7. QUESTION: What is the SBA's definition of a small business? SBA defines a small business as one that is independently owned and operated and is not dominant in its field. Depending on the industry, size standard eligibility is based on the average number of employees for the preceding 12-months or on sales volume averaged over a three-year period. Examples of SBA general size standards include the following: Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured. Wholesaling: Maximum number of employees may not exceed 100. Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided. Retailing: Annual receipts may not exceed $5.0 to $21.5 million, depending on the particular product being provided. General & Heavy Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction. Special Trade Construction: Annual receipts may not exceed $7 million. Agriculture: Annual receipts may not exceed $0.5 to $5.0 million, depending on the agricultural product. 8. QUESTION: If my grandmother was a member of one of the ethnic groups designated by 13 C.F.R. 124.105(a)(i.e. Native American), does that automatically make me a member of that ethnic group? No. You must personally identify yourself with the group culturally, socially and/or racially. It is not enough that your grandmother identified herself as Native American, since your identification with a particular group is in question and not that of your grandmother. 9. QUESTION: Are Portuguese-Americans presumed to be socially disadvantaged? Yes. SBA defines "Hispanic American" to include among others, individuals whose origins are from the Iberian peninsula, which encompasses Portugal and Spain. 10. QUESTION: Do I have to be in business for two years in order to be eligible for the 8(a) program? Normally yes. However, a waiver of the two-year rule may be granted if a company meets certain criteria. The waiver criteria are: (A) the individual(s) upon whom eligibility is to be based must have substantial and demonstrated business management experience; (B) the applicant must have demonstrated technical expertise to carry out its business plan with a substantial likelihood for success; (C) the applicant must have adequate capital to carry out its business plan; (D) the applicant must have a record of successful performance on contracts from governmental and nongovernmental sources in the primary industry category in which the applicant is seeking program certification; and (E) the applicant must have or be able to demonstrate the ability to obtain the personnel, facilities, equipment and any other requirements needed to perform the contract. 11. QUESTION: How long does the 8(a) application process take? The DPCE has 15 days to review the application for completeness. If the application is incomplete, the applicant will have 15 days to provide additional information. The application will then be resubmitted to the regional DPCE. If the DPCE determines the application is complete, a final decision regarding 8(a) Program eligibility should be made within 90 days of SBA's determination that the application is complete. 12. QUESTION: What rights do I have if my application is declined? Each program applicant has the right to request that SBA reconsider a declined application. During the reconsideration process, the applicant may submit additional or changed information. If an application is declined after reconsideration, a new application will not be accepted until twelve months from the date of the reconsideration decision. In addition, if an applicant is declined solely on issues of social disadvantage, economic disadvantage, ownership and/or control, the declined applicant may appeal the decline decision to SBA's Office of Hearings and Appeals (OHA). OHA examines the decline decision only to see if it were arbitrary, capricious or contrary to law. No new or changed information will be considered during the appeal process. 13. QUESTION: After a company is 8(a) certified, how long does it take before its first contract is awarded? A newly certified firm is not eligible for 8(a) contracts until it submits and receives SBA approval for its business plan. After the firm has an approved plan, the length of time before the first 8(a) contract is awarded will vary based on the success of the firm's marketing efforts. While SBA will make every effort to assist a firm with its marketing efforts, the 8(a) program is a self-marketing program and SBA cannot guarantee 8(a) contract awards. 14. QUESTION: Explain the business plan requirement. Promptly after certification, a program participant must submit a business plan which must be approved by a SBA Business Opportunity Specialist (BOS) prior to the program participant being eligible for 8(a) program benefits. The submitted plan must include the following data: -An analysis of market potential. -An analysis of the program participant's strengths and weaknesses. -Specific targets, objectives and goals for business development. -A transition management plan. -Estimates of contract awards pursuant to section 8(a), and from other sources. In addition, each program participant must annually review its currently approved business plan with its SBA BOS and forecast its needs for contract awards under section 8(a) for the next program year. 15. QUESTION: How long can a company participate in the 8(a) program? Program participation is divided into two stages: The developmental stage and the transitional stage. For firms approved for 8(a) program participation after November 15, 1988, the developmental stage is four-years and the transitional stage is five-years. The developmental stage is designed to help 8(a) certified firms overcome their economic disadvantage by providing business development assistance. The transitional stage is designed to help participants overcome the remaining elements of economic disadvantage and to prepare participants for leaving the 8(a) program. 16. QUESTION: What types of assistance are available to 8(a) program participants? The type of assistance available to a program participant is dependent on its stage of development. The following assistance is available to eligible program participants during the developmental stage: -Sole source and competitive 8(a) contract support. -The transfer of technology or surplus property owned by the United States to program participants by grant. -Training sessions to enhance program participant's skills in the area of business principles. The following assistance is available to eligible program participants during the transitional stage: -Sole source and competitive 8(a) contract support. -The transfer of technology or surplus property owned by the United States to program participants by grant. -Training sessions to enhance program participant's skills in the area of business principles. -Assistance from procuring agencies in forming joint ventures. -Training and technical assistance in business planning to help ensure the firm's successful transition from the 8(a) program to the competitive market. 17. QUESTION: What is a "requirement"? A requirement is a contract opportunity from a Federal procuring agency to acquire articles, equipment, supplies, services, materials or construction work. 18. QUESTION: Summarize the types of assistance available to an 8(a) firm. The SBA basically provides 8(a) program participants with contractual, and management/technical assistance. Program participants are also eligible to apply for financial assistance under SBA's 7(a) and 504 programs. 19. QUESTION: What are SSBICs? SSBIC stands for Specialized Small Business Investment Company. SSBICs, formally known as MESBICs (Minority Small Business Investment Companies), are privately owned and operated venture capital firms whose private capital is supplemented (leveraged) by debt or preferred equity which is provided through open market financings guaranteed by SBA. SSBICs provide equity capital and long-term loans exclusively to businesses owned and controlled by persons who are socially or economically disadvantaged. At present there are 94 SSBICs, located in 21 states, plus Washington, DC, and Puerto Rico. For more information regarding this program, contact SBA's District Offices. 20. QUESTION: What is the 7(j) program? The 7(j) program refers to section 7(j) of the Small Business Act. Section 7(j) empowers SBA to obtain and maintain a qualified cadre of individuals and organizations to provide management and technical assistance to socially and economically disadvantaged individuals, businesses owned by those individuals, and individuals and businesses located in low income and/or high unemployment areas. The 7(j) program does not provide financial resources to program clients, but pays the 7(j) service provider using a grant or cooperative agreement mechanism. 21. QUESTION: How does one apply to receive 7(j) assistance? Persons interested in receiving technical or management assistance should contact the nearest SBA office and complete a form requesting counseling, which provides SBA with basic information on the individuals and the business, and on the assistance being sought. 22. QUESTION: How does one apply to provide 7(j) assistance? Individuals can request to be placed on SBA's 7(j) Bidder's Mailing List to receive program announcements by calling the Division of Management and Technical Assistance at (202) 205-6420. Typically, SBA issues a competitive announcement annually requesting proposals (RFPs) to provide management and technical assistance for the upcoming fiscal year. Interested offerors who have been in business for at least one year before the opening date of the program announcement may submit proposals under these RFPs. 23. QUESTION: What is the SBDC program? More than 500,000 small business and preventure clients, each year, take advantage of the counseling, training and a full range of management and technical assistance services made available through the Small Business Development Center (SBDC) program. These services are delivered through a solid network of more than 900 SBDC locations, across the nation, including Puerto Rico, Guam and the Virgin Islands. What do SBDCs do? Located mainly on college and university campuses and in state economic development offices, SBDCs offer "one stop" business development assistance that is tailored to the local community and the needs of individual clients. Helping clients develop business plans, accounting and inventory systems, marketing strategies, financial packages; and, providing engineering, technology and exporting assistance, are some of the types of aid offered at SBDCs. In addition, some groups, such as women, minorities and veterans that, traditionally, have been denied access to both management and technical aid and to equity capital depend heavily on SBDCs to "jump start" their efforts to develop successful businesses. The SBDC program is an excellent example of a public/private partnership, which includes the SBA (Federal government), the educational community, state and local governments and private sector groups, that fosters economic growth through job creation and generation of tax revenues in providing assistance to the nation's small business community. 24. QUESTION: How does SBA assist 8(a) companies with bonding? The Surety Bond Guarantees (SBG) Program is a private - public partnership that provides small and emerging contractors with their only reasonable opportunity to fulfill bonding requirements and compete in the construction industry. It is designed to assist small business contractors who cannot obtain bonds through regular commercial channels. Under the SBG Program, SBA guarantees bonds (up to 90%) that are issued by surety companies on behalf of such contractors. Minority and women-owned businesses, particularly, experience difficulty in obtaining bonds that are required to start and remain in business. They are definite beneficiaries of the program. Contracts with a face value of up to $1.25 million are eligible for the program. 25. QUESTION: Does the SBA offer loans or grants? SBA does not provide grants. It does however offer several loan programs. Information on all loan programs may be obtained from any of SBA's District Offices. 26. QUESTION: Are there any penalties associated with the 8(a) Program resulting from a participant's misrepresentations? Yes. Anyone who misrepresents the status of any firm or person as a small business firm or as a small business owned and controlled by socially and economically disadvantaged individuals in order to obtain benefits, is subject to the following penalty: -Punishment by a fine of not more than $500,000 or by imprisonment for not more than 10 years, or both. ---------- SECTION 8(a) PROGRAM ELIGIBILITY CRITERIA 6/95 SOURCE: 13 CODE OF FEDERAL REGULATIONS Part 124 Public Law 100-656 Public Law 100-574 The Office of Minority Enterprise Development (MED) Program was created to assist socially and economically disadvantaged business persons to gain access to the resources necessary to develop small businesses and improve their ability to compete in the mainstream of the American economy. The most well known element of the MED program is the 8(a) Program, named from Section 8(a) of the Small Business Act. The 8(a) Program is a business development program that provides its participants access to a variety of business development services, including the opportunity to receive federal contracts on a sole-source or limited competition basis. Under the 8(a) Program, SBA enters into prime contracts with federal departments and agencies and subcontracts the performance of work to disadvantaged small businesses that are certified participants in the program. THE SECTION 8(A) PROGRAM SMALL BUSINESS: A firm must qualify as a small business as defined in Part 121 of SBA Rules and Regulations. The particular size standard to be applied will be based on the primary industry classification of the applicant firm. OWNERSHIP: A firm must be at least 51 percent unconditionally owned by an individual(s) who is a citizen of the United States and who is determined by SBA to be socially and economically disadvantaged. a. In the case of a partnership, 51% of the partnership interest must be unconditionally owned by an individual(s) determined by SBA to be socially and economically disadvantaged. Such unconditional ownership must be reflected in the firm's partnership agreement. b. In the case of a corporation, 51% of each class of voting stock and 51% of the aggregate of all outstanding shares of stock must be unconditionally owned by an individual(s) determined by SBA to be socially and economically disadvantaged. c. SBA does not consider a firm to be unconditionally owned if socially and economically disadvantaged individual(s) claim ownership of a firm based on unexercised stock options or other arrangements. d. When determining ownership of a firm for 8(a) program eligibility, SBA considers options to purchase stock held by non-disadvantaged individuals or entities. The right to convert non-voting stock or debentures held by non-disadvantaged individuals or entities into exercised voting stock is also be considered. However, potential ownership interests (such as options or warrants) held by investment companies licensed under the Small Business Investment Act 1958 shall not be treated as ownership interests until exercised. e. The individual(s) upon whom eligibility is based must receive at least 51% of the annual distribution of dividends paid on the voting stock of a corporate applicant firm. In the event that the stock is sold, the individual(s) upon whom eligibility is based must be entitled to receive 100% of the value of each share of stock in his/her possession. In the event of dissolution of the corporation, the individual(s) upon whom eligibility is based must be entitled to receive at least 51% of the retained earnings of the firm and 100% of the value of each share of stock in his/her possession. f. One 8(a) firm may not hold more than a 10% equity ownership interest in any other 8(a) firm. g. An individual in an 8(a) firm, whether or not disadvantaged, is prohibited from simultaneously holding an equity ownership interest exceeding 10% in another 8(a) firm. An entity who/which is a partner, stockholder, officer and/or director is also prohibited. Partners or shareholders that are financial institutions licensed or chartered by Federal, state or local government, including investment companies licensed under the Small Business Investment Act of 1958, shall not hold ownership interest in an 8(a) firm exceeding 49%. h. A non-8(a) firm in the same or similar line of business is prohibited from having an equity ownership interest in an 8(a) firm which exceeds 10%. i. With prior SBA approval, an 8(a) firm may continue participation in the program after a change of ownership. Prior SBA approval is not required when the change in ownership represents less than a 10% interest in the firm or results from the death or incapacity due to serious or long-term illness or injury of a disadvantaged principal. However, the firm shall notify SBA as soon as possible. j. A program participant's request for SBA's approval for the issuance of a public offering is treated as a request for a change in ownership and SBA examines the firm's continued need for access to the business development resources of the 8(a) program. CONTROL AND MANAGEMENT: The management and daily business operations of a firm must be controlled by an owner(s) of the firm who has (have) been determined to be socially and economically disadvantaged. For disadvantaged individual to control the firm, that individual must have managerial or technical experience and competency directly related to the primary industry in which the firm is seeking 8(a) certification. The firm must be managed on a full-time basis by one or more individuals who are socially and economically disadvantaged. Such person(s) must possess requisite management or technical capabilities as determined by SBA. For those industries requiring professional licenses, SBA determines that the firm or individuals employed by the firm hold(s) the requisite license(s). At least one socially and economically disadvantaged full- time manager must hold the position of President or Chief Executive Officer. This precludes outside employment or other business interest by the individual which conflicts with the management of the firm or hinders it in achieving the objectives of its business development plan. (1) A non-disadvantaged individual as an officer or member of the Board of Directors of the 8(a) firm, or through stock ownership, has the power to control day- to-day direction of the business affairs of the firm. (2) The non-disadvantaged individual or entity provides critical financial or bonding support or licenses to the 8(a) firm which directly or indirectly allows the non-disadvantaged individual to gain control or direction of the 8(a) firm. (3) A non-disadvantaged individual or entity exercises voting control of the participant through a nominee(s). (4) A non-disadvantaged individual or entity controls the corporation or the individual disadvantaged owners through loan arrangement. (5) Other contractual relationships exist with non- disadvantaged individual or entities, the terms of which would create control over the disadvantaged concern. SOCIAL DISADVANTAGE: Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identities as members of groups without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control. In the absence of evidence to the contrary, the following individuals are presumed to be socially disadvantaged: Black Americans, Hispanic Americans, Native Americans (American Indians, Eskimos, Aleuts or Native Hawaiians); Asia, Pacific Americans (person with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China, Taiwan, Laos, Cambodia, Kampuchea, Vietnam, Korea, the Philippines, U.S. Trust Territory of the Pacific Islands, Republic of Palau, Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Hong Kong, Fiji, Tonga, Kiributi, Tuvalu, or Nauru); Subcontinent Asian Americans (persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands or Nepal); and members of other groups designated from time-to-time by SBA. An individual seeking socially disadvantaged status as a member of a designated group may be required to demonstrate that he/she holds himself/herself out and is identified as a member of a designated group if SBA has reason to question such individual's status as a group member. An individual who is not a member of one of the above-named groups must establish his/her individual social disadvantage on the basis of clear and convincing evidence. A clear and convincing case of social disadvantage must include the following elements: 1. The individual's social disadvantage must stem from his or her color, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society, or other similar cause not common to small business persons who are not socially disadvantaged. 2. The individual must demonstrate that he or she has personally suffered social disadvantage, not merely claim membership in a non-designated group which could be considered socially disadvantaged. 3. The individual's social disadvantage must be rooted in treatment which he or she has experienced in American society, not in other countries. 4. The individual's social disadvantage must be chronic and substantial, not fleeting or insignificant. 5. The individual's social disadvantage must have negatively impacted on his or her entry into and/or advancement in the business world. SBA considers any relevant evidence in assessing this element of an applicant's case. SBA particularly considers and places emphasis on the following experiences of the individual, where relevant: Education. SBA considers, as evidence of an individual's social disadvantage, denial of equal access to institutions of higher education; exclusion from social and professional association with students and teachers; denial of educational honors; social patterns or pressures which have discouraged the individual from pursuing a professional or business education; and other similar factors. Employment. SBA considers, as evidence of an individual's social disadvantage, discrimination in hiring, promotions and other aspects of professional advancement; discrimination in pay and fringe benefits; discrimination in other terms and conditions of employment; retaliatory behavior by an employer; social patterns or pressures which have channelled the individual into nonprofessional or non-business fields; and other similar factors. The socially and economically disadvantaged individual(s) upon whom eligibility is based shall control the Board of Directors of a firm, either in actual numbers of voting directors or through weighted voting. All voting rights of the Board of Directors must comply with applicable state law. Individuals who are not socially and economically disadvantaged may be involved in the management of an firm and may be stockholders, partners, officers, and/or directors of such firm. Such individual(s), their spouses or immediate family members who reside in the individual's household may not however: 1. Exercise actual control or have the power to control the applicant or 8(a) firm. 2. Be an officer or director or more than a 10% owner, stockholder, or partner of another firm in the same or similar line of business as the applicant firm. 3. Receive excessive compensation from the applicant or 8(a) firm as directors, officers or employees. Individual compensation from the firm in any form, including dividends paid to a non-disadvantaged owner, his/her spouse or immediate family member residing in the same household, is deemed excessive if it exceeds the compensation received by the Chief Executive Officer or the President. However, with SBA's approval, the Chief Executive Officer or President may elect to the take a lower salary than such a non-disadvantaged individual if it is demonstrated to be in the best interest of the applicant or 8(a) firm. 4. Be former employers of the disadvantaged owner(s) of the applicant or 8(a) firm unless it is determined by the AA/MED that the contemplated relationship between the former employer and the disadvantaged individual or firm does not give the former actual control or the potential to control the individual or 8(a) firm and such relationship is in the best interests of the 8(a) firm. 5. Have an equity ownership interest of more than 10% in another 8(a) firm. Non-disadvantaged individuals or entities may be found to control or have the power to control in any of the following circumstances, which are illustrative only and not all inclusive: Non-disadvantaged individuals control the voting Board of Directors of the 8(a) firm. Control can be directly through majority voting membership or indirectly if the by-laws allow non-disadvantaged individuals to block any action proposed by the disadvantaged individuals through negative control. For example, any equal number of disadvantaged an non-disadvantaged voting directors could create negative control. ECONOMIC DISADVANTAGE: For purposes of the 8(a) program, economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities. In determining economic disadvantage for purposes of 8(a) program eligibility, SBA compares the firm's business and financial profile with profiles of businesses in the same or similar line of business which are not owned and controlled by socially and economically disadvantaged individuals. In determining the degree of diminished credit and capital opportunities of a socially disadvantaged individual, SBA considers factors relating both to the firm and to the individual. An individual whose personal net worth exceeds $250,000.00 is not considered economically disadvantaged for purposes of 8(a) program entry. When SBA calculates the personal net worth of an individual claiming disadvantaged status for purposes of the 8(a) program, SBA excludes the individual's ownership interest in the applicant or participating 8(a) firm and the equity in his/her primary personal residence. However, any portion of such equity in his/her primary residence attributable to excessive withdrawals from the applicant or participating 8(a) firm is not excluded. POTENTIAL FOR SUCCESS: A firm must demonstrate that it has been in business in the primary industry classification in which it seeks 8(a) certification for two full years prior to the date of its 8(a) application by submitting income tax returns showing revenues for each of the two previous years. To determine whether a firm has the potential for success, SBA evaluates technical and managerial experience and competency of the individual(s) upon whom eligibility is based, the financial capacity of the applicant firm and the firm's record of performance on previous Federal and private sector contracts in the primary industry in which the firm is seeking 8(a) certification. ADDITIONAL REQUIREMENTS: Individual character review of the applicant(s). Standards of conduct applies to SBA employees and former employees. Manufacturers and regular dealers must meet the requirements of the Walsh-Healey Public Contracts Act in its primary industry classification. Immediate family members living in the same household may not each use their individual disadvantaged status to qualify more than one business firm for 8(a) Program Participation if the firms are in the same or similar line of business. INELIGIBLE BUSINESSES: Brokers and Packagers Franchises Debarred or suspended person or firm Non-profit Organizations Concerns owned by other disadvantaged firms TWO-YEAR RULE Public Law 101-574 allows a waiver of the two-year in business requirement for participation in the 8(a) program when the following criteria are met: A. The individual(s) upon whom eligibility is based have substantially demonstrated business management experience; B. The applicant has demonstrated technical expertise to carry out its business plan with a substantial likelihood for success; C. The applicant has adequate capital to carry out the business plan; D. The applicant has a record of successful performance on contracts from governmental and nongovernmental sources in the primary industry category in which the applicant is seeking program certification; and E. The applicant has, or can demonstrate the ability to obtain the personnel, facilities, equipment, and any other requirements needed to perform such contracts. ---------- (Interim Guidelines) 6/95 U.S. SMALL BUSINESS ADMINISTRATION OFFICE OF MINORITY ENTERPRISE DEVELOPMENT DIVISION OF MANAGEMENT AND TECHNICAL ASSISTANCE UNSOLICITED PROPOSAL GUIDELINES The mission of the U.S. Small Business Administration (SBA) Office of Minority Enterprise Development (MED) is to assist economically and socially disadvantaged business persons achieve competitive viability in the marketplace. To that end, MED has been authorized by Section 7(j) of the Small Business Act to provide specialized assistance, through its Division of Management and Technical Assistance (DMTA), to socially and economically disadvantaged individuals and firms owned by such individuals, businesses located in areas of low income or high unemployment, and firms owned by low-income individuals. Unsolicited proposals are one means by which DMTA obtains innovative and unique methods and procedures to accomplish its mission. An unsolicited proposal is a written submission to the SBA for the purpose of obtaining a cooperative agreement, grant, or contract to provide innovative or unique methods of management and technical assistance to strengthen the business development skills of the 7(j) eligible population. Individuals or firms/organizations may submit unsolicited proposals in accordance with the procedures listed in Subpart 15.5 "Unsolicited Proposals" in the Federal Acquisition Regulations (FAR). (See also the section entitled "Submission Instructions" in the Interim Guidelines.) CONTENTS OF THE UNSOLICITED PROPOSAL Basic Information Provide the following basic information: - Name, address and telephone number of the applicant firm or organization; name of the contact person. - Type of organization (i.e., non-profit, profit, educational, etc.). - Identification of proprietary data (if any) to be used solely for the purpose of evaluation. - Identification of other parties/agencies to whom the proposal was also submitted. - Identification of any funding commitments from other sources. Cost Proposal Provide an itemized budget. Support each line item or cost category using a narrative format. Please note that the purchase of equipment is not an allowable expense. Technical Proposal ABSTRACT: Present a clear and concise overview of the proposed effort. INTRODUCTION: Provide background information about the applicant organization's relevant capabilities, experience, and successes. PROBLEM STATEMENT: Briefly describe the problem to be addressed by the proposed effort. Support observations with statistical data (as appropriate), statements by authorities and other knowledgeable individuals, and comments by intended clients or beneficiaries of the proposed effort. PROJECT OBJECTIVES: Provide project objectives which are time phased, measurable and result oriented (i.e., number of beneficiaries, how often services will be provided, and the duration of services). PROJECT METHODOLOGY: Clearly describe project activities and explain how and why they were selected. The sequence of events and staffing pattern of the proposed effort should be provided. MANAGEMENT PLAN: Outline a plan reflecting tasks to be accomplished by period of performance. A milestone chart should be included. EVALUATION : Present a plan for the ongoing monitoring and evaluation of project activities; describe the criteria and tools that will be used in measuring success. SUBMISSION INSTRUCTIONS The geographical service area of the proposed effort determines the SBA office to which the application package shall be submitted. If the geographical area to be served is contained within the jurisdiction of one district office, the proposal shall be submitted to the Minority Enterprise Development Office of that district office. (See SBA ONLINE "Local Information" for the addresses of the district offices.) If the proposed geographical area crosses district office boundaries, a separate copy of the proposal shall be submitted to each district office involved. REVIEW PROCESS FOR UNSOLICITED PROPOSALS Within 60 days of receipt of an unsolicited proposal, an SBA staff person will be assigned to review the package to determine if (1) the submission can be considered a valid unsolicited proposal as defined in Federal Acquisition Regulations (FAR) 15.503; and (2) the submission contains sufficient technical and budgetary detail for purposes of evaluation. The application will be returned to the offeror with a brief letter of explanation if the proposed effort does not support the mission of the 7(j) Program or is deemed inappropriate for further consideration. A Technical Evaluation Panel will be convened to review and evaluate the proposal should the package contain sufficient information to do so. Past performance under previous 7(j) awards will be taken into consideration during the evaluation. Clarification or additional information may be required from the offeror. If the information provided by the offeror is not sufficient to satisfy the questions or concerns for which clarification was requested, the proposal will be returned. If the Technical Evaluation Panel recommends funding, and the District Director concurs, the proposal is forwarded to the Assistant Administrator of DMTA for final programmatic approval. The Assistant Administrator sends all recommended proposals to the Associate Administrator for MED for funding approval and forwarding to the Office of Procurement and Grants Management (OPGM) for final cost negotiation with the applicant. The general time frame to complete a cost proposal evaluation is 90 days. OPGM may request pre-award cost proposal evaluations from the Office of the Inspector General. Awards will not be issued until any and all issues are resolved. The issues may include the following: an inadequate accounting system for Government contracts; outstanding funds from prior year grant awards where SBA has made final determination of disallowance, or lack of a final cost submission under a prior grant. Unsolicited proposals are given full consideration for funding. However, this occurs after the Agency has considered proposals offered in response to program announcements that solicit proposals for specific management and technical service requirements. Firms and organizations wishing to be placed on DMTA's Bidders List in order to receive future program announcements, may call (202) 205-6420 to make this request. ---------- U.S. Small Business Administration SBA Championing America's Entrepreneurs The Facts About ... Minority Prequalification Loan Program The Minority Prequalification Loan Program helps eligible small businesses - those owned and operated by members of racial or ethnic minority groups - access capital. The program is a coordinated effort of both the public and private sectors. It uses local, private sector nonprofit and for-profit organizations as intermediaries to assist in the loan application process. A prospective borrower works with the intermediary to develop a viable loan application. The application is then submitted directly to the SBA for con- sideration of a loan prequalification. On approval, the intermediary also can assist the applicant in locating a competitive lender. Who Is Eligible? Businesses that: * Are at least 51 percent owned and managed by a racial or ethnic minor- ity person(s); * Meet SBA 7(a) Loan Guaranty Program size standards and general eligi- bility criteria; and * Are not engaged in speculation or investment in rental real estate. The maximum loan amount under the Minority Prequalification Loan Program is generally limited to $250,000. The Prequalification Process Document Preparation The prospective borrower works with a local technical-assistance organiza- tion (intermediary), designated by the SBA, to prepare a business plan and complete a prequalification loan application. Application Submission The intermediary reviews credit information, performs a loan analysis, and submits the application to the SBA. Application Review The SBA reviews the completed application to determine whether it meets the requirements for a guaranteed loan and makes an approval decision. Qualification If the SBA approves the application, the agency issues a prequalification letter. This letter states the SBA's intent to authorize a loan guaranty. Lender Selection When an applicant receives the SBA's prequalification letter, the intermedi- ary can assist in locating a competitive lender interested in making an SBA-guaranteed loan. Required Documentation Business financial statements or tax returns and personal financial state- ments will be required from all owners and guarantors. Applications for new businesses will require submission of a business plan. If proceeds are to be used to purchase an existing business, a copy of the terms of sale and a financial statement on the existing business are required, as well as a statement of benefit to the business as a result of the purchase. If buyer and seller are related, that must be disclosed on the application. Use of Funds Loan funds can be used for typical business purposes such as working capi- tal, debt pay-ment, equipment and inventory purchases, construction, and real estate purchases. Proceeds may not be used for distribution to prin- cipals or for payment of personal debt. The intermediary will require proof that credit card and refinanced debts are business-related and not personal. Interest Rates Applicants negotiate terms with the lender. Interest rates may be fixed or variable and are tied to the prime rate. For loans of less than seven years, rates may not exceed 2.25 percent over prime. For loans of seven years or longer, the maximum rate is 2.75 percent over prime. Loans under $50,000 may be subject to slightly higher rates. Maturity The length of time for repayment depends on the ability to repay and the use of the loan proceeds. Generally, the loan maturity will be between five and 10 years for working capital; up to 10 years for machinery and equipment; and up to 25 years for real estate, construction, or the purchase of equip- ment with a useful life of at least 25 years. Credit/Collateral Primary considerations include a willingness and ability to pay debts, as indicated by a good credit history; the likelihood that expected earnings will be sufficient to pay obligations; and the probability that the business has a good chance of achieving success with the requested financing. Normal- ly, business assets will be pledged, and personal assets when warranted. As with all 7(a) loan programs, loans will not be declined where inadequate collateral is the only unfavorable factor. All owners of 20 percent or more of the business are required to personally guarantee the note. Equity The applicant must have a reasonable stake in the business. Pilot Sites Baltimore, MD (410) 962-4392 Boston, MA (617) 565-5590 Columbia, SC (803) 765-5377 Detroit, MI (313) 226-6075 Fargo, ND (701) 239-5131 Helena, MT (406) 449-5381 Houston, TX (713) 773-6500 Kansas City, MO (816) 374-6708 Los Angeles, CA (818) 552-3210 Miami, FL (305) 536-5521 Milwaukee, WI (414) 297-3941 New York, NY (212) 264-2454 Philadelphia, PA (610) 962-3800 St. Louis, MO (314) 539-6600 Santa Ana, CA (714) 836-2494 Seattle, WA (206) 553-7310 This program may also be provided at other sites. Check with your local SBA office to see if it is available in your area. For More Information Information is power. Make it your business to know what is available, where to get it and, most importantly, how to use it. Sources of information in- clude: U.S. Small Business Administration * SBA District Offices * SBA OnLine (electronic bulletin board) * Business Information Centers (BICs) * One-Stop Capital Shops (OSCSs)* * Service Corps of Retired Executives (SCORE) * Small Business Development Centers (SBDCs) * U.S. Export Assistance Centers (USEACs)* * Women's Business Centers (WBCs)* * Inquire at your local SBA office as to availability The SBA has offices located throughout the United States. For the one nearest you, look under "U.S. Government" in your telephone directory, or call the SBA Answer Desk at (800) U-ASK-SBA or (800) 827-5722. To send a fax to the SBA, dial (202) 205-7064. For the hearing impaired, the TDD number is (704) 344-6640. To access the agency's electronic public information services, you may call: SBA OnLine: electronic bulletin board (modem and computer required) * (800) 697-4636 (limited access) * (900) 463-4636 (full access) * (202) 401-9600 (D.C. metro area) Internet: using uniform resource locators (URLs) * SBA home page: www.sba.gov * SBA gopher: gopher.sba.gov * File transfer protocol: ftp.sba.gov * U.S. Business Advisor: www.business.gov You may also request a free copy of The Resource Directory for Small Business Management, a listing of for-sale publications and videotapes, from your local SBA office or the SBA Answer Desk. Other Sources of Information * State economic development agencies * Chambers of commerce * Local colleges and universities * Manufacturers and suppliers of small business products and services * Small business or industry trade associations Did You Know that the SBA - * has a portfolio guaranteeing over $29 billion in loans to 200,000 small businesses that other-wise would not have had such access to capital? * guaranteed over 52,700 loans totaling $10 billion to America's small businesses in fiscal year 1996? * extended management and technical assistance last year to nearly 850,000 small businesses through its 950 small business development centers and 13,000 SCORE volunteers? * provided more than 38,000 loans totaling $987 million to disaster victims for residential, personal-property, and business losses in fiscal year 1996? * has increased its venture-capital program with more private capital in the past two years than in the previous 15 years combined? * provides loan guaranties and technical assistance to small business exporters through U.S. export assistance centers in 15 cities? * can respond to written small business questions through the U.S. Business Advisor on the Internet (www.business.gov)? * has approved $26 million in loans to minority businesses since the inception of the Minority Prequalification Loan Program in April 1995? All of the SBA's programs and services are provided to the public on a nondiscriminatory basis. FS0067 (06/97) ---------- End of Document