SBA Poised to Increase 8(a) Income and Net Worth Eligibility Standards

We recently discussed at length the SBA’s proposed rule to get rid of WOSB self-certification and revise some of the other WOSB certification rules. Well, it seems like SBA is crossing a lot of things off its to-do list, because in that same proposed rule, SBA also proposes to “to make the economic disadvantage requirements for the 8(a) BD program consistent to the economic disadvantage requirements for women-owned firms seeking EDWOSB status” and to “eliminate the distinction in the 8(a) BD program for initial entry into and continued eligibility for the program.”

If the rule is approved, the dollar amounts for initial 8(a) economic disadvantage eligibility would increase quite a bit, making more people economically eligible. Read on for the details on this proposed change.

The proposed rules would state:

  • “The net worth of an individual claiming disadvantage must be less than $750,000.” (increased from the current $250,000, making initial and continuing eligibility the same number)
  • “SBA will presume that an individual is not economically disadvantaged if his or her adjusted gross income averaged over the three preceding years exceeds $350,000.” (increased from the current $250,000, making initial and continuing eligibility the same number)
  • “An individual will generally not be considered economically disadvantaged if the fair market value of all his or her assets (including his or her primary residence and the value of the applicant/Participant firm) exceeds $6 million.” (increased from the current $4 million, making initial and continuing eligibility the same number)

The SBA is proposing to change the rule to avoid the “the anomaly of a concern applying for EDWOSB and 8(a) BD status simultaneously and being found to be economically disadvantaged for EDWOSB purposes, but denied eligibility for the 8(a) BD program based on not being economically disadvantaged.”

SBA wants your comments on the dollar thresholds for eligibility:

[T]his rule proposes to adopt the $750,000 net worth continuing eligibility standard for all economic disadvantage determinations in the 8(a) BD program.  SBA specifically requests comments on whether the $375,000 net worth standard or the $750,000 net worth standard should be used for both the 8(a) BD and EDWOSB programs. In particular, SBA requests comments on how the different standards would affect small business owners participating in the federal marketplace.

This is just a proposed rule, and SBA would like your comments. If approved, this change should make it a little easier to qualify for the 8(a) program. But SBA may also want to think about increasing the numbers for continued eligibility, since the point of the program is to help participants develop their businesses.