Regulation

Small Business Administration

§ 124.112

technical and management experience,
the applicant has a record of successful
performance on contracts from governmental or nongovernmental sources in
its primary industry category, and the
applicant has adequate capital to sustain its operations and carry out its
business plan as a Participant; or
(3) The CDC has made a firm written
commitment to support the operations
of the applicant concern and it has the
financial ability to do so.
(g) A CDC-owned applicant and all of
its principals must have good character
as set forth in § 124.108(a).
[63 FR 35739, June 30, 1998, as amended at 76
FR 8257, Feb. 11, 2011]

§ 124.112 What criteria must a business
meet to remain eligible to participate in the 8(a) BD program?
(a) Standards. In order for a concern
(except those owned by Indian tribes,
ANCs, Native Hawaiian Organizations
or CDCs) to remain eligible for 8(a) BD
program participation, it must continue to meet all eligibility criteria
contained in § 124.101 through § 124.108.
For concerns owned by Indian tribes,
ANCs, Native Hawaiian Organizations
or CDCs to remain eligible, they must
meet the criteria set forth in this
§ 124.112 to the extent that they are not
inconsistent with § 124.109, § 124.110 and
§ 124.111, respectively. The concern
must inform SBA in writing of any
changes in circumstances which would
adversely affect its program eligibility,
especially economic disadvantage and
ownership and control. Any concern
that fails to meet the eligibility requirements after being admitted to the
program will be subject to termination
or early graduation under §§ 124.302
through 124.304, as appropriate.
(b) Submissions supporting continued
eligibility. As part of an annual review,
each Participant must annually submit
to the servicing district office the following:
(1) A certification that it meets the
8(a) BD program eligibility requirements as set forth in § 124.101 through
§ 124.108 and paragraph (a) of this section;
(2) A certification that there have
been no changed circumstances which
could adversely affect the Participant’s
program eligibility. If the Participant

is unable to provide such certification,
the Participant must inform SBA of
any changes and provide relevant supporting documentation.
(3) Personal financial information for
each disadvantaged owner;
(4) A record from each individual
claiming disadvantaged status regarding the transfer of assets for less than
fair market value to any immediate
family member, or to a trust any beneficiary of which is an immediate family
member, within two years of the date
of the annual review. The record must
provide the name of the recipient(s)
and family relationship, and the difference between the fair market value
of the asset transferred and the value
received by the disadvantaged individual.
(5) A record of all payments, compensation, and distributions (including
loans, advances, salaries and dividends)
made by the Participant to each of its
owners, officers or directors, or to any
person or entity affiliated with such individuals;
(6) If it is an approved protege, a narrative report detailing the contacts it
has had with its mentor and benefits it
has received from the mentor/protege
relationship. See § 124.520(b)(4) for additional annual requirements;
(7) A listing of any fees paid to
agents or representatives to assist the
Participant in obtaining or seeking to
obtain a Federal contract;
(8) A report for each 8(a) contract
performed during the year explaining
how the performance of work requirements are being met for the contract,
including any 8(a) contracts performed
as a joint venture;
(9) IRS Form 4506, Request for Copy
or Transcript of Tax Form; and
(10) Such other information as SBA
may deem necessary. For other required annual submissions, see §§ 124.601
through 124.603.
(c) Eligibility reviews. (1) Upon receipt
of specific and credible information alleging that a Participant no longer
meets the eligibility requirements for
continued program eligibility, SBA
will review the concern’s eligibility for
continued participation in the program.

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§ 124.112

13 CFR Ch. I (1–1–12 Edition)

(2) Sufficient reasons for SBA to conclude that a socially disadvantaged individual is no longer economically disadvantaged include, but are not limited
to, excessive withdrawals of funds or
other assets withdrawn from the concern by its owners, or substantial personal assets, income or net worth of
any disadvantaged owner. SBA may
also consider access by the Participant
firm to a significant new source of capital or loans since the financial condition of the Participant is considered in
evaluating the disadvantaged individual’s economic status.
(d) Excessive withdrawals. (1) The term
withdrawal includes, but is not limited
to, the following: Cash dividends; distributions in excess of amounts needed
to pay S Corporation, LLC or partnership taxes; cash and property withdrawals; payments to immediate family members not employed by the Participant; bonuses to officers; and investments on behalf of an owner. Although officers’ salaries are generally
not considered withdrawals for purposes of this paragraph, SBA will count
those salaries as withdrawals where
SBA believes that a firm is attempting
to circumvent the excessive withdrawal limitations though the payment
of officers’ salaries. SBA will look at
the totality of the circumstances in determining whether to include any specific amount as a withdrawal under
this paragraph.
(2) If SBA determines that funds or
assets have been excessively withdrawn
from the Participant for the personal
benefit of one or more owners or managers, or any person or entity affiliated
with such owners or managers, and
such withdrawal was detrimental to
the achievement of the targets, objectives, and goals contained in the Participant’s business plan, SBA may:
(i) Initiate termination proceedings
under §§ 124.303 and 124.304 where the
withdrawals detrimentally affect the
achievement of the Participant’s targets, objectives and goals set forth in
its business plan, or its overall business development;
(ii) Initiate early graduation proceedings under §§ 124.302 and 124.303
where the withdrawals do not adversely affect the Participant’s business development; or

(iii) Require an appropriate reinvestment of funds or other assets, as well
as any other actions SBA deems necessary to counteract the detrimental
effects of the withdrawals, as a condition of the Participant maintaining
program eligibility.
(3) Withdrawals are excessive if in
the aggregate during any fiscal year of
the Participant they exceed (i) $250,000
for firms with sales up to $1,000,000; (ii)
$300,000 for firms with sales between
$1,000,000 and $2,000,000; and (iii) $400,000
for
firms
with
sales
exceeding
$2,000,000.
(4) The fact that a concern’s net
worth has increased despite withdrawals that are deemed excessive will
not preclude SBA from determining
that such withdrawals were detrimental to the attainment of the concern’s business objectives or to its
overall business development.
(5) The excessive withdrawal analysis
does not apply to Participants owned
by Tribes, ANCs, NHOs, or CDCs where
a withdrawal is made for the benefit of
the Tribe, ANC, NHO, CDC or the native or shareholder community. It
does, however, apply to withdrawals
from a firm owned by a Tribe, ANC,
NHO, or CDC that do not benefit the
relevant entity or community. Thus, if
funds or assets are withdrawn from an
entity-owned Participant for the benefit of a non-disadvantaged manager or
owner that exceed the withdrawal
thresholds, SBA may find that withdrawal to be excessive. For example, a
$1,000,000 payout to a non-disadvantaged manager would be deemed an excessive withdrawal.
(e) Change in primary industry classification. A Participant may request
that the primary industry classification contained in its business plan be
changed by filing such a request with
its servicing SBA district office. SBA
will grant such a request where the
Participant can demonstrate that the
majority of its total revenues during a
three-year period have evolved from
one NAICS code to another.
(f) Graduation determination. As part
of the final annual review performed by
SBA prior to the expiration of a Participant’s nine-year program term,
SBA will determine if the Participant
has met the targets, objectives and

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Small Business Administration

§ 124.204

goals set forth in its business plan and,
thus, whether the Participant will be
considered to have graduated from the
8(a) BD program at the expiration of
its program term. A firm that has not
met the targets, objectives and goals
set forth in its business plan at the end
of its nine-year term in the 8(a) BD
program will not be considered to have
graduated from the 8(a) BD program,
but rather to have merely completed
its program term.
[63 FR 35739, June 30, 1998, as amended at 76
FR 8257, Feb. 11, 2011]

APPLYING TO THE 8(a) BD PROGRAM
§ 124.201 May any business submit an
application?
Any concern or any individual on behalf of a business has the right to apply
for 8(a) BD program participation
whether or not there is an appearance
of eligibility.
§ 124.202 How must an application be
filed?
An application for 8(a) BD program
admission must generally be filed in an
electronic format. An electronic application can be found by going to the 8(a)
BD page of SBA’s Web site (http://
www.sba.gov). An applicant concern
that does not have access to the electronic format or does not wish to file
an electronic application may request
in writing a hard copy application from
the AA/BD. The SBA district office will
provide an applicant concern with information regarding the 8(a) BD program.
[76 FR 8257, Feb. 11, 2011]

§ 124.203 What must a concern submit
to apply to the 8(a) BD program?
Each 8(a) BD applicant concern must
submit those forms and attachments
required by SBA when applying for admission to the 8(a) BD program. These
forms and attachments may include,
but not be limited to, financial statements, copies of signed Federal personal and business tax returns, individual and business bank statements,
and personal history statements. An
applicant must also submit a signed
IRS Form 4506T, Request for Copy or
Transcript of Tax Form, to SBA. In all
cases, the applicant must provide a wet

signature from each individual claiming social and economic disadvantage
status.
[76 FR 8257, Feb. 11, 2011]

§ 124.204 How does SBA process applications for 8(a) BD program admission?
(a) The AA/BD is authorized to approve or decline applications for admission to the 8(a) BD program. The DPCE
will receive, review and evaluate all
8(a) BD applications. SBA will advise
each program applicant within 15 days
after the receipt of an application
whether the application is complete
and suitable for evaluation and, if not,
what additional information or clarification is required to complete the application. SBA will process an application for 8(a) BD program participation
within 90 days of receipt of a complete
application package by the DPCE. Incomplete packages will not be processed.
(b) SBA, in its sole discretion, may
request clarification of information
contained in the application at any
time in the application process. SBA
will take into account any clarifications made by an applicant in response
to a request for such by SBA.
(c) The burden of proof to demonstrate eligibility is on the applicant
concern. If a concern does not provide
requested information within the allotted time provided by SBA, or if it submits incomplete information, SBA may
presume that disclosure of the missing
information would adversely affect the
firm or would demonstrate lack of eligibility in the area to which the information relates.
(d) An applicant must be eligible as
of the date the AA/BD issues a decision. The decision will be based on the
facts set forth in the application, any
information received in response to
SBA’s request for clarification made
pursuant to paragraph (b) of this section, and any changed circumstances
since the date of application.
(e) Changed circumstances for an applicant concern occurring subsequent
to its application and which adversely
affect eligibility will be considered and
may constitute grounds for decline.
The applicant must inform SBA of any

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