White Paper Banner Image

When Does A Company Need A Two-Year Waiver for 8a Certification?

The two basic factors for whether a two year waiver is required:
1. Has the applicant concern been in business for 2-years as evidenced by two tax returns?
2. Has the applicant concern generated business in the primary NAICS code for the preceding two years?

Both conditions must be met.
Sometimes it can be unclear as to whether or not you need to complete a two year waiver. The following are case study examples for when a firm should present a two year waiver and when one is not required.

Questions to SBA:
Do you use any sort of guideline for the amount of revenue a company should have before attempting a two year waiver, $50K? $250K??? This is assuming all other conditions are met?
Answer:
Yes, we look at the revenues (there is no set amount because it depends on the industry) but we also look at where/who the contracts / the revenues are coming from (more than 1 or 2 sources).

Scenario I
Year 1 – $0 sales
Year 2 – $189k sales
Year 3 – $369k sales
Year 4 May – The owner finally quits his other employment and starts devoting full time to the business. Total sales for the business are $457k in year 4.
Year 5 January – application time
NO
the two year waiver is not required because the firm has generated revenues for the last 2-years. However; the SBA will look at the owner’ management experience to confirm potential of success.

Scenario II
Year 1 – $100k sales
Year 2 – $500k sales
Year 3 – $0 sales
Year 4 – January new owner purchases the business $200k in sales
Year 5 – January (application point)
YES
The two year waiver will be required in this scenario. Because the firm did not generate revenue for the last 2-years in its primary NAICS code.

Scenario III
Year 1 – $250k in sales owner 1 (40%), owner 2 (30%), owner 3 (30%) – owner 1 is president and signs all contracts, is highest paid, and is in control of the business decisions.
Year 2 – $500k in sales
Year 3 – $500k in sales
Year 4 – $500k in sales
Year 5 December – owner 1 buys out owner 2 and becomes 70% owner. $500k in sales.
Year 6 – January – (application time)
NO

A two year waiver is not required because the firm has been in existence for more than 2-years. In this scenario the SBA will review the legal documents closely. The documents will have to indicate that the owner has been the President (highest officer) for some time and that owner 1 has been signing contracts on behalf of the company for some time. The SBA will also look at all potential control issues closely to be sure there is no one else has control over owner.

For more information on how to apply, you may call us at 513-843-4288.