The U.S. Small Business Association (SBA) offers qualified small businesses several alternatives to support their expansion. Specifically, the 8(a) Business Development Program gives minority-owned enterprises access to sole source and reduced competition government contracts as well as business development tools.
It’s a frequent assumption that SBA loans are issued by these government agencies directly, but this is untrue. Instead, small business administrations indirectly support startups and other small enterprises. They achieve this through collaborating closely with lenders, establishing standards for loans issued by lenders, and simplifying the SBA loan application process for small business owners and entrepreneurs.
Due to some of the new rules pertaining to loans and assistance for small businesses affected by COVID-19, the Small Business Administration and SBA loans have regularly been in the news since the pandemic’s beginning.
The Paycheck Protection Program, the Shuttered Venture Operators Grant Program, the Restaurant Revitalization Fund, the SBA Debt Relief Program, the COVID-19 Economic Injury Disaster Loan Program and cross-program eligibility options (which simply means that some small businesses and entrepreneurs may be eligible for more than one of thes) are some of the programs that the U.S. Small Business Administration is currently offering through their website.
You should contact a local small business attorney or a small business administration office in your area for more help with financial relief if you are an entrepreneur or small company owner whose small business has been affected by COVID-19. One of these schemes may entitle your small business to a loan.
A Small Business: What Is It?
Small businesses are privately owned and run establishments with a manageable number of staff members and a limited sales volume. State-specific and industry-specific small business standards are different in the United States. Due to their simplicity of operation and the prevalence of certain tax benefits for small firms, small enterprises are growing in popularity.
Typically, a small firm is one that employs fewer than 500 people in the manufacturing sector and earns less than $7 million per year in the non-manufacturing sector. Typically, small firms are organized as corporations, partnerships, or sole proprietorships.
Which Laws Apply to Small Businesses?
Most license requirements relating to the kind of activity that the entity engages in are covered by rules that apply to small enterprises. Penalties such as fines, jail time, or the loss of the ability to operate a business may be imposed for failing to comply with the legal requirements for small enterprises. Federal, state, and local regulations can be used to further categorize licensing needs.
The federal requirements for small businesses are:
- EIN, or Employer Identification Number: Most businesses need to file for an EIN in order to operate lawfully in the United States, regardless of the size of the company or the number of employees hired.
- Health Insurance requirements: A National Standard Employer Identifier (NSEI) may be needed to track electronic health care transactions if the small firm offers health insurance to its workers.
- Registering intellectual property: Although not compulsory, federal intellectual property registration is strongly advised. The exclusive use of intellectual property can be made available to small business owners through patents, trademarks, trade names, and copyrights.
- License relevant to an activity: If your small business performs any of the following federally regulated activities, you may need to contact a federal agency:
- Producing pharmaceuticals and prescription drugs
- Distributing drugs, alcohol, or weapons
- Preparing pork products
- Performing broadcasting activities
- Giving investment recommendations
Regulations by the State
State-issued business licenses serve as the primary record for taxation and other essential business operations. Small business support organizations are available in several states to help businesses comply with regulations:
- Professional/Occupational Licenses: Some professions, including those of doctors, accountants, and auto mechanics, call for specific licenses. Additionally, some professions call for “continuous education.”
- Sales of Products with Licensing: You may need a state license to sell alcohol, gasoline, lottery tickets, or guns. If your state levies both a state income tax and a retail sales tax, you may need to apply for an EIN or a sales tax license.
- Trade Name Registration: You might have to file a trade name registration for your small business.
- Employer Registration: If a business has recruited any number of employees, unemployment insurance contributions are typically necessary.
Local and Municipal Needs
The following are possible local and municipal business requirements:
- Local permits: Almost all commercial activities call either a county or city license. These kinds of licenses enable the entity to function inside a particular county’s or city’s territorial jurisdiction. They are generally simple to obtain and may just cost a minimal amount.
- Requests for permits: Local municipalities may also have unique activity-related permit requirements in addition to state requirements for permits.
- Zoning Regulations: Only specially defined commercial zones normally permit the operation of small firms.
How Do I Become Eligible for the Business Development Program of the SBA?
An organization must also be owned and operated by a “socially and economically disadvantaged” citizen of the United States in order to meet the SBA’s definition of a small business. Racial minorities are among the socially and economically disadvantaged populations.
A minority person must directly own at least 51% of the small firm.
Prior to the application, the small firm had been in operation for at least two years.
What Happens If My Company Is Younger Than Two Years?
If the following requirements outlined in the Code of Federal Regulations are met, the SBA will also certify startups:
- The minority owner “has demonstrated technical experience to carry out its business strategy with a reasonable possibility of success” and “considerable business management experience.”
- There are sufficient funds to maintain operations and carry out the business plan.
- A showing that you have the qualifications necessary to carry out government contracts.
What Advantages Does the Program Offer?
The program for mentor-protégés offers chances for mentorship, joint ventures, and capital raising for small businesses.
Programs for executive growth and training and sole-source contracts are available. The capacity to compete for larger contracts in a joint venture or as a team also exists.
Where Can I Apply?
The SBA offers online training and free assistance with the application procedure. To submit an application, a small firm must follow these procedures:
- Obtain and confirm the validity of all business documentation, such as bylaws, licenses, income tax reports, and permits.
- For your company, obtain a D-U-N-S identifying number. The IRS can provide you with a tax identification number or employer identification number.
- Activate your company’s account and profile in the System for Award Management (SAM).
- Start the 8(a) application after creating a user ID for the SBA General Login System.
What Happens if I Have a Loan Dispute?
Small business owners may have various choices available to them if they disagree over an SBA loan. The small business owner could want to file a criminal complaint, for instance, if the incident involves fraud or forgeries involving loans.
On the other side, the small business owner may be entitled to sue the opposing party for monetary damages if the disagreement is a civil matter, such as loan qualification. A litigation strategy must be completed and submitted to the U.S. Small Business Administration for approval if a small business owner disagrees over a loan covered by the 7(a) or 504 lending programs.
All other issues may be resolved by speaking with the Office of Hearings and Appeals or by seeking legal advice from a nearby small business attorney.
Should I Seek Legal Advice When it Comes to the Business Development Program?
The SBA offers several free resources to assist small firms with the process, but if you want to be sure that your tax, license, and permit paperwork, as well as your corporation paperwork, is in line, you might need help. If so, you might want to contact a small business lawyer.
