8a Application – 70 percent Rules

The SBA has a concentration of business rule that is based upon OHA court precedence. This precedence does not permit an applicant firm to have a single client representing more than 70% of the 8a applicant firm’s overall business. The rational the SBA uses is that this creates a likelihood of success issue because if the firm lost the major client this would create a “going concern” issue for the firm. In addition being over 70% reliant on one client will often create an identity of interest causing an affiliation between the two entities causing an additional reason for the SBA’s denial of the application.

From interviews with the SBA it has been revealed that the SBA first looks at the firms “snap-shot” for the current year. If the firm is under the 70% threshold by a “reasonable margin” the SBA will end its enquiries at this point and usually not investigate further. If the firm is not over this threshold by a large enough margin then the SBA will look at a combination of the prior three years, and include the current year in its calculation.

50% concentration in one firm – the SBA will most likely not continue its enquiries. The firm will pass the 70% rule.

Example 2

Even though the 8a applicant firm has one customer in any given year the greatest overall percentage of business with AAA Enterprises is 35.7% which is under the 70% threshold, so therefore the firm is able to be certified.

Example 3

Under the scenario above the firm would fail and not be eligible at this time for the 8a certification based upon the 71% being over the 70% weight with AAA Enterprises.