“They’re asking for what?” This is a not-so-uncommon response from small businesses applying to SBA’s 8(a) Business Development Program (“8(a) Program”), which is notorious for the amount of information – and paper – that applicants are required to provide SBA to demonstrate eligibility. However, a recent SBA final rulemaking implemented changes to the 8(a) Program application process to eliminate certain requirements which, according to SBA, impose an unnecessary burden on program applicants.
For example, SBA has done away with the requirement that applicants submit an IRS Form 4506T, Request for Copy or Transcript of Tax Form, which is used to verify that tax returns have been filed and income taxes have been paid. Because applicants already have to provide SBA with copies of their filed tax returns and attest to whether they have any delinquent tax obligations, it appears SBA will rely on that information alone, unless there is a basis to question it. In addition, individuals claiming disadvantaged status are no longer required to provide a “wet signature” to certify that the information submitted as part of the 8(a) Program application is true and accurate. Instead, SBA believes that an electronic, uploaded signature should be sufficient, as long as applicants know that the individual upon whom eligibility is based takes responsibility for the accuracy of any information submitted to SBA.
Notably, SBA also eliminated the requirement that individuals claiming disadvantaged status provide a written narrative describing how their ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities (e.g., denied loan applications or lines of credit). According to SBA, a determination as to whether an individual qualifies as economically disadvantaged is based solely on an analysis of objective financial data relating to the individual’s net worth, income and total assets. In other words, if the figures reported on an individual’s personal financial statement, tax returns, etc. are below the regulatory thresholds, SBA’s analysis ends there, and the individual will be deemed economically disadvantaged.
These recent changes signal that SBA is aiming to streamline the process for applying to the 8(a) Program. And, in fact, SBA plans that all applications will be filed electronically, thereby eliminating the hardcopy submission requirement altogether (although it is unclear when this will actually happen). Still, the final rule notes that SBA has the right to request any applicant to submit specific information that may be needed in connection with an application, which suggests that SBA is by no means taking a relaxed approach towards vetting 8(a) Program applicants.
About the author: Peter Ford is an associate with PilieroMazza in the Government Contracts Group. He may be reached at [email protected].