The SBA recently published its final rule for economic disadvantaged criteria for the 8(a) program effective July 15, 2020.
The three criteria for proving and maintaining Economic Disadvantaged status during the program are as follows: (1) $6 Million in total assets, (2) $750,000 net worth and (3) $350,000 adjusted gross income. Two key components of this change are that only one set of criteria is utilized at application for and continued eligibility throughout the 8(a) program and the 8(a) program criteria is aligned with the EDWOSB program criteria. In my opinion these two components are important changes that are needed to minimize confusion for firms attempting to monitor and maintain compliance within both Federal programs.
Planning for compliance is key to successfully managing the rapid growth many firms experience in the 8(a) program and is a critical component for effectively controlling your eventual exit strategy. Investing the time and resources needed to fully understand compliance and acquiring the appropriate platforms or services to maintain the proper oversight of current and future compliance is critical. Properly managing this key component to your business will allow for a successful transition from the 8(a) program and will maximize your long-term financial goals as an owner.
It is essential to understand how the SBA interprets the terms net worth, total assets, and adjusted gross income and advantageous to add these components to the Key Performance Indicators (KPI’s) that you should be tracking monthly as a business executive. It is crucial to ensure that your Comptroller, CFO, and/or Accounting Professionals are aware of your compliance criteria and that they regularly monitor and update you through accurate reporting and pro forma forecasts. Regularly monitoring the past, present, and future will familiarize you with those decisions that will greatly affect each of those numbers and that will, in turn, allow you to predict when you may be approaching these limits so that you will have time to manage effectively and avoid a premature exit from the program. Be informed, be proactive, and be Bold!