These FAQ’s will provide minority- and woman-owned firms with the basics of business certification. The questions below are intended to start the information journey and to shortcut some of the time required to research the information on your own.
Who qualifies for small disadvantaged business (SDB) programs?
Disadvantaged businesses must meet two criteria-demonstrating both social and economic disadvantage. Social disadvantage is determined by tracing racial or ethnic heritage to named minority groups (for example, African American, Hispanic American, Native American, Eskimo, Aleut, Asian Pacific, and Subcontinent Asian American).
The word “minority” is predominantly used by local and county level programs. State and federal programs generally use the more encompassing term “disadvantaged.” Once social disadvantage has been established, economic disadvantage is determined if personal net worth does not exceed $750,000, excluding money invested in the business and equity in a personal residence.
For the 8(a) program (see below), the cutoff for economic disadvantage is $250,000 net worth, excluding money invested in business or equity in a primary residence.
How is assistance for women-owned and disadvantaged businesses apportioned?
Current federal regulations set a goal of 20% of government contracts awarded to small businesses. Of that amount, the goal is to award one quarter to women-owned businesses and another quarter to disadvantaged businesses (SDB’s).
How is woman or minority ownership defined for federal programs?
To be considered either a disadvantaged or woman-owned business, your company must be at least 51% owned and operated by qualifying individuals.
What is the 8(a) program and how does it work?
The 8(a) Business Development program gets its name from Section 8(a) of the Small Business Act. It is a business development initiative designed by the federal government to help SDB’s overcome social and economic disadvantage and transition them into the economic mainstream.
The 8(a) businesses are assisted through a combination of management and technical assistance and increased access to federal contracting opportunities. While being certified as 8(a) does not guarantee government contracts, it greatly enhances the participant’s chances of getting them either by non-competitive award or winning a bid. In the 8(a) process, the U.S. Small Business Administration works with federal purchasing agents to establish Memorandums of Understanding (MOU’s) that enable 8(a) firms to directly contract with those agencies.
In some cases, the SBA may function as a prime contractor, subcontracting work to 8(a) firms. The program runs for a maximum of nine years. During this time participants must complete an initial four-year development phase and gradually wean themselves away from dependence on special 8(a) contracting opportunities.
How does my business become recognized as an SDB?
It depends on the type of contract you’re bidding for. If you are going after an 8(a) program, the SBA requires a detailed application process and conducts an exhaustive review to determine SDB status. If you are simply bidding on a contract and want to be considered a woman-owned business, you can self-certify. That is, you declare that according to the definition described in the “Who Qualifies?” section of the bid, you meet the criteria.
The catch is that any agency or competing firm can challenge your status and slow the process of awarding the contract in question. On the other hand, certification as 8(a), while not universally recognized, is frequently accepted as proof of eligibility by state and local jurisdictions. So it could be worthwhile to go through the 8(a) certification process, if you think you qualify. Also, 8(a) certification automatically gives you certification as an SDB.
Do I need a small business certification to participate in Small and Underutilized Business programs?
Yes, your company must be certified to participate in the SDB/DBE Programs. Qualification to become certified depends on the type of business, its gross revenue, and its location.
Why are there so many types of certifications?
Just as there are different types of businesses, each certifying body has different criteria according to its primary focus. Prior to seeking certification, you should thoroughly examine your business and its target markets to determine which, if any, certifications can provide more opportunities to your company.
How long does certification take?
Although different agencies have their own processes, it generally takes approximately 30-60 days once a completed certification application is received.
I have a retail store (hair salon, dry cleaners, etc.). Do I need to get certified?
Most “business to consumer” type of businesses do not need to become certified. For businesses who sell to other businesses, find out who they sell to. Becoming certified as a diversity supplier can open more doors to purchasing departments, and also help larger corporations meet their diversity and community support goals.
How much does it cost to become certified?
Again, it depends on the type of certification. Most federal and state certification programs are free. Our company has the experience and knowledge to get your business certified as a Minority at county or state level. The fees vary depending on the type of certification you will like to get your company certified in.
We charge depending on the time spent on the application process, requirements, or type of certification.