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Affiliated Entities and Their Effect on 8a Certification

Affiliated Entity – If one business concern or entity has the power to control another either directly through ownership structure or indirectly by other means this will cause the SBA to combine or “affiliate” the two entities. Identity of Interest – An affiliation can take almost any form, meaning that due to commonality between the two firms they become affiliated. In addition, the SBA will view the totality of the circumstances and may find two firms to be affiliated even if one single factor alone by its own merit or weight would not create an affiliation.

Power to Control – In addition control does not have to be exercised to create an affiliation, the power to control only has to exist and be exercisable at some future date to create the affiliation. For the purpose of getting your firm 8a certified having the firm be affiliated with another firm opens the application to two additional areas of scrutiny: Control – The SBA will look for any possible negative control issues from the other firm.

Size – The SBA will require proof that the combined companies do not exceed the applicant firm size standard if affiliated.

Factors the SBA will review for affiliation before granting an 8a certification:

1. Ownership structure of the firm
2. Shared management between firms
3. Common ownership between firms
4. Certifications needed by management to run the day to day operations of the firm
5. Previous relationships with ties to another concern
6. Contractual Relationships
7. Share employees between firms
8. Commonality of Name
9. One entity providing a large portion of another’s total revenue
10. One entity is a major or exclusive supplier to another firm
11. One firm provides financing or loan guarantees or bonding to another firm
12. Identity of Interest – meaning the SBA is affiliating the two entities for some other reason.

SBA Affiliation is likely to occur in all cases where the following conditions are present. This is based upon the claim that the two parties act as one with a common interest:

1. If an owner of the firm who has 10% or greater interest in the 8a applicant firm and also owns another business in a similar industry the SBA in most cases will affiliate the two firms.
2. If an owner of the firm has a spouse that has a firm in the same industry as the applicant concern, even if the spouse has no ownership of the 8a applicant concern the two firms will be affiliated.