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Finance

What is 8A Certification?

Nicole Madison
By
Updated May 16, 2024
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In the United States, the Small Business Administration (SBA) has a program called the 8(a)BD program, which gets its name from a section of the United States Small Business Act. The program is intended to help disadvantaged businesses be competitive; it does this by offering these businesses support and the chance to secure federal contracts. Eligibility for the program requires a company to qualify as a small business and be owned and controlled by a person or group who is considered disadvantaged socially or economically. The business must be able to show that it has potential for success as well. If it meets these basic requirements, it must secure 8(a)BD certification, which is basically approval, in order to participate in the program.

8a certification is available to businesses that are owned and controlled by socially disadvantaged individuals. This includes people who belong to groups who have suffered racial, ethnic, or cultural prejudices through no fault of their own. The SBA program considers African Americans, Hispanic Americans, Native Americans, and Asian Pacific Americans socially disadvantaged. It may include other groups in this category as well.

A business may also qualify for certification if its owners are economically disadvantaged. By the SBA definition, an economically disadvantaged individual is a person who has difficulty competing in the business world because of the lack of enough capital and impaired credit opportunities. Generally, the SBA does not consider an individual economically disadvantaged if his net worth is more than $250,000 US Dollars (USD). This figure excludes the person's equity in the business and the equity he has in his home.

A business need not be entirely owned by socially and economically disadvantaged individuals in order for it to be eligible. The SBA only requires the disadvantaged owners to have majority ownership. This means a company that is 51% owned by socially and economically disadvantaged individuals may be eligible for the program. Additionally, businesses owned by Caucasian women may be eligible as well.

There are also time requirements set for a business that wants to secure 8a certification. The SBA requires businesses to be in operation for at least two years before applying. The business also has to provide a business plan and financial statements. Additionally, it must offer services or products for which federal contracts will be available. For example, this may include businesses in construction, office support, manufacturing, and technology industries.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Nicole Madison
By Nicole Madison
Nicole Madison's love for learning inspires her work as a SmartCapitalMind writer, where she focuses on topics like homeschooling, parenting, health, science, and business. Her passion for knowledge is evident in the well-researched and informative articles she authors. As a mother of four, Nicole balances work with quality family time activities such as reading, camping, and beach trips.
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Discussion Comments

By browncoat — On Aug 25, 2012

@croydon - People find it very difficult to cast off the privilege that they've grown up with. It's more difficult than they say to put yourself in another's shoes.

Many minorities are working from a point of disadvantage, but it's almost impossible for someone who hasn't been at that point to recognize it.

I hope that section 8a certification really does something to help out minority owned businesses, because the more success they manage to achieve the less likely we'll need this kind of program in the future.

By croydon — On Aug 24, 2012

@Iluviaporos - I don't consider this kind of thing discrimination. For one thing, they aren't exactly lumping all white men together. White men who are considered to be economically disadvantaged are also eligible to go through the 8a certification process.

But more importantly, when you look at it through a different lens, you can see that this kind of program exists to address discrimination. I don't know what the statistics are, but I'm sure that minority owned businesses don't do as well as other businesses. They have more difficulty with almost every part of the process, so they are at a disadvantage. This is a boost in order to try and bring them in line with other businesses with the hope that doing that will eventually change the whole culture.

By lluviaporos — On Aug 23, 2012

This is exactly the kind of program that gets under my skin. It's supposed to be anti-discrimination but in reality it's just discriminating against another group. Yeah, I know that Caucasian men generally have it easier than other people, but they still shouldn't be discriminated against by this kind of minority certification.

By MissDaphne — On Sep 08, 2011

@SailorJerry - Right out of college, before I started teaching, I worked as an office assistance at an 8a company. I don't know how small it *had* to be, but our firm had only one owner (or whatever you call it; it was an S corporation I think). We had three or four employees in the corporate office, not all full-time, plus about ten more in the contracts we were administering (like running the Fleet and Family Support Center on a naval base).

But if you're in the service, you have a lot of options available. The SBA has special veteran-owned business services, including help getting your business set up. As an 8a company, we always kind of felt like the veteran-owned businesses had an even better deal! You should definitely look into *all* your options. You're in a pretty enviable position! Good luck with your new venture.

By SailorJerry — On Sep 08, 2011

A buddy of mine and I are looking to go into business together when my service is up. We'd like to do some consulting for the military. He's African American, so I guess as long as he owned slightly more than half the company, 8(a) certification would be an option.

Are there other requirements that you have to meet? How small does the company have to be to qualify for SBA 8a certification?

By anon103030 — On Aug 10, 2010

Extremely useful information! Excellent summary of a detailed topic.

Nicole Madison

Nicole Madison

Nicole Madison's love for learning inspires her work as a SmartCapitalMind writer, where she focuses on topics like...
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