If you’ve ever assembled a piece of furniture from IKEA, then you know that while doing-it-yourself seems like a better, faster way of getting something done, it’s usually more complicated. Fortunately, IKEA furniture comes with instructions. Once you understand how to assemble it, you’ve got a desk in no-time.

The same logic applies to self-certifying as a Small Disadvantaged Business (SDB). Years ago, you used to have to apply through the U.S. Small Business Administration. Since 2008, businesses have been able to self-certify through the System for Award Management, or SAM. It can be confusing, naturally, so you may need some direction. Below you’ll find things you should know about what’s involved in SDB self-certification.Tweet This

Two important things to note:

Why Get Certified as a Small Disadvantaged Business?

SDB certification can make it easier for you to get federal contracts and become a federal supplier, because federal (and state) governments have set-aside contracts and opportunities for certain kinds of businesses (such as women, minority, and veteran-owned). It can also help you convey to customers that you’re a reliable and trustworthy business. John Chaverra, a U.S. veteran and part owner of American Protection Group security company, says he makes it a priority for customers to know his business is veteran-owned.

“We want to make sure that they know we have military backgrounds, that they know that they’re dealing with people that are not irresponsible and that we know what we’re doing. When people think about military personnel, the first thing that comes to their mind is people that give their lives for freedom, good people that just go beyond their line of duty to make sure that everybody’s safe.”

“So, when we bring it to our clients and even our employees that, hey, we’re in the military, it’s just pride, because they look at us differently, because we have the time that we served and we did something for this country, not only for the country but for the people.”

SDB Certification Requirements

The first step still involves the SBA, as you should understand eligibility criteria for SDBs, including:

  • The firm must be 51% or more owned and control by one or more disadvantaged persons
  • The disadvantaged person or persons must be socially disadvantaged and economically disadvantaged
  • The firm must be small, according to SBA’s size standards

The SBA’s size standards can be found here.

Socially & Economically Disadvantaged, Defined

Federal law sets the criteria for socially disadvantaged persons and is as follows:

“… those who have been subjected to racial or ethnic prejudice or cultural bias within American society, because of their identification as members of groups without regard to their individual qualities.”

For application purposes, the following groups are presumed socially disadvantaged by the SBA:

  • Black Americans
  • Hispanic Americans
  • Native Americans
  • Asian Pacific Americans
  • Subcontinent Asian American

Eligibility for persons not included in this presumed list will be determined on a case-by-case basis.

In order to be economically disadvantaged, the SBA must have first established the person as socially disadvantaged. According to SBA’s regulations, “Economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities.”

If your business applies for certain programs based upon your SDB status, the SBA may require you to submit the following in order to be determined economically disadvantaged:

  • Narrative statement of economic disadvantage
  • Personal financial information (including tax returns and certain SBA forms)
    • When married, the socially disadvantaged individual must submit separate financial information to SBA for his or her spouse (including tax returns and certain SBA forms)

Factors that can be taken into account by the SBA when determining whether or not an individual is economically disadvantaged are:

  • All income for the past three years, including any unusual income levels
  • Fair market value of all assets
  • Personal net worth (assets and liabilities)
  • Transfer of assets to an immediate family member, directly or via trust
  • Availability of individual retirement account (IRA) funds or other official retirement accounts
  • Income received from the firm when filing taxes as an S corporation or partnership
  • Reinvestments into the applicant firm
  • Tax payments for the firm

How to Self-Certify as a SDB

As you can see, there is a lot to understand before self-certifying in SAM. Taking actual action can be as simple as filling in three areas of data in SAM, for both global and local:

1. All the NAICS codes you are presently capable of performing in. Designate the primary one which represents the bulk of your business activity

2. The total number of employees (head count, not full-time equivalent). If there are seasonal variations, use the annual average number

3. The total revenues from all sources

Once you’ve done this, the system will run your data against the small business size standards and determine the size of your business. After your business size has appeared in SAM, you can update your profile and click the “disadvantaged” box. This is where understanding the SBA criteria becomes important, because you absolutely should not mark the disadvantaged box unless you meet the criteria. (If you cannot check the disadvantaged box, you may have not have waited long enough for the data to process, you may have entered incorrect size data, or you may have accidentally marked your business as a not-for-profit.)

More Options for SDBs

SDBs can also apply to be a part of the SBA’s 8(a) Business Development Program, which is an added resource for small business, with separate requirements.

There is currently no formal government registration process for women-, minority-, or veteran-owned businesses that differs from the standard process all businesses follow. However, ownership status is relevant when applying for federal and state government contracts. Being certified as women-, minority-. or veteran-owned can make your business eligible for set-aside federal and state contracts.

Diverse small businesses can also become suppliers in corporate supplier diversity programs. Becoming a corporate supplier can get a small business access to capital, growth and opportunities.

Photo Credit: likeamacheen, Twenty20