The differences between 8(a) and SDB certification can be confusing and overwhelming. For those seeking to understand how these two options work, it’s important to understand the key characteristics of each.
By knowing what qualifies businesses for 8(a) and SDB status, business owners can decide which certification is right for them. This article provides an overview of the key differences between 8(a) and SDB certificates to help you make an informed decision about which option is right for your business.
What Is the 8(a) Certificate?
The 8(a) certificate is a designation granted by the Small Business Administration (SBA) to small, disadvantaged businesses that meet certain eligibility criteria.
To qualify for this program, a business must be at least 51% owned and controlled by individuals who are socially and economically disadvantaged. In order to obtain an 8(a) certification, businesses must also demonstrate that they face significant barriers to entry in the marketplace due to their social and economic circumstances.
In order to qualify for an 8(a) certificate, applicants must meet certain eligibility requirements, including the following:
- Your business must be at least 51% owned and controlled by individuals who are considered socially and economically disadvantaged. This includes Black, Hispanic, Native American, and Asian Americans.
- Your business must meet certain financial criteria, which vary according to the nature of your industry. This can include having a net worth of less than $250,000 or annual revenues below $5 million per year.
- You must have been in operation for at least 12 months prior to applying for an 8(a) certificate.
- You must not have participated in the 8(a) program before
What Is the SDB Certificate?
Every year, the Federal Government gives out approximately $50 billion in contracts to Small Disadvantaged Businesses, which equals 10% of all federal contract dollars.
SBA’s Office of Government Contracting and Business Development is responsible for keeping track of the progress made by 24 Executive Branch agencies regarding contracting with Small Disadvantaged Businesses.
If you want to register your business as a Small Disadvantaged Business, you must meet the following criteria set by the Code of Federal Regulations:
- A disadvantaged person(s) must own and control at least 51% of the firm.
- The individual(s) in question must be both economically and socially disadvantaged.
- According to SBA’s size standards, the firm must be small.
8(a) Certificate vs. SDB Certificate – Key Differences
Suppose you are looking to start a small, disadvantaged business and are unsure whether the 8(a) or SDB certification program is right for you. In that case, it’s important to understand the key characteristics of each program.
The primary differences between these two options include eligibility requirements, reporting requirements, and fees.
- The 8(a) program is generally seen as more rigorous than the SDB certification process, with more stringent eligibility requirements and higher fees.
- Only 1% of all federal contract dollars are set aside for 8(a) participants, while 5% are set aside for SDBs.
- Participating in the 8(a) program gives firms exclusive access to specialized government contracting assistance that may not be the case with the SDBs.
- Additionally, businesses seeking 8(a) certification must provide a business plan outlining their growth strategy and goals. In contrast, businesses applying for SDB certification simply need to demonstrate how they meet the program’s qualifications.
- The 8(a) certificate is valid for nine years and is split into two phases: four years of development and five transitional. The SDB register has a 12-year lifespan.
- The 8(a) certificate offers to set aside eligibility for small businesses, which means that a certain percentage of federal contract money is reserved specifically for these businesses. By contrast, the SDB certification is open to all small businesses that are not socially or economically disadvantaged and does not offer any set-aside benefits.
If you are looking for a streamlined and affordable way to start your small business, the SDB certification program may be better than the 8(a) certification process. However, if you are looking for more support and resources as your business grows, then the 8(a) program may be a better choice.
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