The U.S. Small Business Administration (SBA) has issued a final ruling intended to promote equal opportunity for all small business owners seeking to apply for the 8(a) Business Development Program (8(a) BD Program) by rescinding the rebuttable presumption. The ruling will go into effect Sept. 10.
The rebuttable presumption asserted that certain designated groups are inherently socially disadvantaged, making them immediately eligible for the program. With the SBA’s ruling, however, those regulatory standards have been scrapped, paving the way for a wider range of applicants to be considered socially disadvantaged, qualifying them for programmatic benefits and services.
Going forward, any small business owner may qualify for the program by claiming that DEI policies or affirmative action programs have directly harmed their business in the past. The SBA will release an updated test allowing U.S. citizens to prove they have social disadvantage by showing a university, corporation or federal, state or local government was biased against them due to their race, ethnicity or cultural group or favored a different individual due to their race, ethnicity or cultural group.
Entities that have already qualified under the SBA’s previous standards as socially disadvantaged will not be required to retake the test. Notably, the test will only apply to small businesses owned by individuals. Those owned by entities – such as tribes, Alaska Native Corporations, Native Hawaiian Organizations or Community Development Corporations – will be unaffected by the updated eligibility ruling.
The original version of this ruling – published June 11 – laid the groundwork for the updated regulations and social disadvantage test. The proposed ruling is largely based on Ultima Services v. U.S. Department of Agriculture, wherein the judge determined that rebuttable presumption is discriminatory and required the SBA to abandon its use.
Historically, the 8(a) BDA Program presumed Asian, Pacific Islander, Black, Hispanic and Native American small business owners automatically qualified as socially disadvantaged. With that presumption removed, all small business owners are entitled for consideration based on individual disadvantages impacting their capacity to break into the business world without expressing race-based qualifications.
Small businesses seeking to qualify for the program must demonstrate that a socially or economically disadvantaged individual, an economically disadvantaged tribe or an economically disadvantaged Native Hawaiian Organization owns at least 51 percent of the business.
Photo by Tim Samuel from Pexels
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