All Small Mentor-Protege: SBA Confirms “Two Per Lifetime” Limit

A small business “can have no more than two [SBA] mentors over the life of the business,” according to the SBA’s All Small Mentor-Protege Program website.

The SBA’s clarification of the lifetime limit provides important guidance for proteges, especially because the SBA’s mentor-protege regulations aren’t exactly crystal clear when it comes to this point.  The SBA’s limit ensures that small businesses don’t become permanent proteges–but is “two per lifetime” the best way to carry out that policy?

The SBA’s All Small Mentor-Protege Program regulations are rather ambiguous when it comes to the number of mentors a protege may have in its lifetime.  Here’s what the regulations say:

(2) A protégé firm may generally have only one mentor at a time. SBA may approve a second mentor for a particular protégé firm where the second relationship will not compete or otherwise conflict with the assistance set forth in the first mentor-protégé relationship and:

(i) The second relationship pertains to an unrelated NAICS code; or

(ii) The protégé firm is seeking to acquire a specific expertise that the first mentor does not possess.

From this text, one might believe that the only restriction is on having more than one mentor “at a time,” and that the SBA permits a small business to have an indefinite number of mentors in the small business’s lifetime.  Instead, the SBA has consistently interpreted its regulations as permitting only two mentors over the protege’s lifetime, regardless of whether those mentor-protege agreements run concurrently or consecutively.

The SBA’s All Small Mentor-Protege Program website now informs readers of the lifetime limit:

A protégé may have two mentors at the same time — as long at those relationships don’t conflict or compete with each other. However, a protégé can have no more than two mentors over the life of the businesses.

No doubt, that’s a lot clearer than the regulations when it comes to this important restriction.

I understand SBA’s interest in limiting the amount of time a small business can spend as a protege.  The purpose of the All Small Mentor-Protege Program is to enhance the capabilities of protege firms through business development assistance.  Allowing a company to spend an indefinite amount of time as a protege could undermine this purpose by encouraging companies to become permanent proteges, offering their size and socioeconomic statuses to benefit a revolving cast of mentors.

But is the “two per lifetime” limit the best way to achieve this goal?  I don’t think so.

A mentor-protege relationship can fail for any number of reasons–many of which are beyond the protege’s sole control.  The mentor might fail to provide the assistance it promised.  The companies’ leadership teams might have personality differences.  The companies’ respective lines of business may diverge over time.  The mentor’s leadership may change its mind about participating in the All Small Mentor-Protege Program.  And so on.

The SBA’s regulations and template All Small Mentor-Protege agreement permit each party–mentor and protege–to terminate a mentor-protege agreement, with or without cause, upon 30 days’ notice to the other party and the SBA.  If the mentor wants out of the relationship, it can get out.  Easily.

Now think how these policies, combined with the lifetime limit, could negatively impact a protege.  Let’s say a small business–“Protege A”–enters a mentor-protege agreement with a large company, “Mentor X.”  Four months into the agreement, Mentor X’s CEO unexpectedly dies, and a new CEO is appointed.  The new CEO wants to move Mentor X in a different direction, focusing on commercial contracts instead of federal government business.  So, she notifies Protege A and the SBA that Mentor X is terminating the mentor-protege agreement.

In this scenario, Protege A is now down to one potential mentor–even though Protege A received only four months of mentoring from Mentor X.  Because the SBA’s regulations allow a single mentor-protege agreement to last up to six years, Protege A, through no fault of its own, has lost up to 68 months of mentoring.

Situations like Protege A’s aren’t limited to unusual events like the death of a CEO.  Mentor X could have terminated the agreement for any reason, or no reason at all, leaving Protege A with very little to show for one of its two lifetime mentor-protege opportunities.

In my view, there’s a better way to meet the SBA’s policy goal while preventing unfair results like these.  Instead of limiting a protege by the number of mentors, the SBA should limit a protege by the number of years spent in as a protege in the All Small Mentor-Protege Program.

As I mentioned above, the SBA allows each mentor-protege agreement to last up to six years, so long as everyone (mentor, protege, and SBA) agrees.  And each protege is entitled to two mentors.  Hence, a protege can receive up to 12 years of mentoring under the All Small Mentor-Protege Program.

So why not make that the limit?  Each protege could participate in the All Small Mentor-Protege Program for up to 12 years, but those 12 years could be divided in different ways.  Some proteges might have two mentors for six years each.  Others, three mentors for four years each.  And so on.  Limiting participation by years, instead of by number of mentors, would solve the inherent unfairness of situations like Protege A’s, while still achieving SBA’s goal of ensuring that small businesses don’t serve as proteges indefinitely.

SBA, if you’re reading (and I know a few of you SBA types do read SmallGovCon–it’s okay to admit it!), I hope you give it some thought.  In the meantime, though, proteges and prospective proteges ought to take note of the lifetime limit.  The SBA’s approval of your first mentor-protege agreement effectively uses up 50% of your lifetime opportunity to participate in the All Small Mentor-Protege Program, no matter how long the mentor-protege agreement lasts.

Choose your mentor wisely.  And cross your fingers.