10 MISTAKES 8(A) APPLICANTS MAKE & HOW TO AVOID THEM
Updated: Feb 9, 2021
Applying for 8a certification is not easy. If you follow only the rules found on the SBA’s website you are almost guaranteed to be denied. The following are some of the most common and fatal mistakes we see on the SBA 8a applications we review:
Sign and notarize every document where indicated. It sounds simple but you must sign, date and/or notarize every document indicated by the SBA. If not, the application will be returned costing you precious time.
Double check your responses to every question even if you have someone else prepare your application. You are solely responsible for the answers and documents that you provide to the SBA. If you answer certain questions incorrectly or inaccurately you can and will be denied certification.
Respond truthfully to every question. For example, if you were arrested at age 14 but the record was expunged you must still answer “Yes” when asked if you were ever arrested. The SBA will conduct a background check on you and will check your credit. If the SBA determines that you answered untruthfully to any question, you can be denied.
You shouldn’t own more than one company if you are applying for 8a certification. You should divest yourself of any interest in other companies or reorganize your ownership interests long before you apply for 8a certification.
Make sure your financial documents show a positive cash flow. If your balance sheets show a negative cash flow or if your taxes show a loss this indicates that your company has little opportunity for success in the 8a program. Consequently, you can be denied certification on that basis.
Be certain that the NAICS Code you use on your taxes and other documents matches the NAICS for which you seek certification. If the NAICS codes don’t match, SBA can make a determination that you lack experience in the particular NAICS code you are seeking certification.
Make sure that figures you enter in the Form 413 personal financial statement are accurate at the time you apply. You will also need to provide documentation to support every number you enter on the form. For example, if you indicate that you have $500 in savings, you will need to provide a copy of your savings account statement showing $500 in the bank.
Don’t partner with former employers. When you accept former employers as a partner in your new business, you risk the SBA finding an affiliation between you and your former employer. If the SBA determines that an affiliation exists between the companies, you can be denied 8a certification.
Diversify your client base. If the SBA determines that you derive 70% or more of your income from a single private (not government) client, the SBA can deny your application.
Don’t do business with family members who are or were participants in the 8a program. Although the rules have changed, the SBA can still deny your application if it deems that your business is affiliated with a family member’s business who is currently or was a participant in the 8a program.
Please feel free to get in touch with me personally should you have any questions related to the 8a program. If you have made one of these mistakes discussed above with your application, I encourage you to call me so that we can discuss your situation. It does not matter what state you live in or where you company is based. I will provide you with a FREE 15 minute consultation where we can go over your situation.
Photo by Erik Mclean on Unsplash