[Code of Federal Regulations]

[Title 13, Volume 1]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 13CFR124.104]



[Page 366-367]

 

                TITLE 13--BUSINESS CREDIT AND ASSISTANCE

 

                CHAPTER I--SMALL BUSINESS ADMINISTRATION

 

PART 124_8(a) BUSINESS DEVELOPMENT/SMALL DISADVANTAGED BUSINESS STATUS 

DETERMINATIONS--Table of Contents

 

                   Subpart A_8(a) Business Development

 

Sec. 124.104  Who is economically disadvantaged?



    (a) General. 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 as compared to others in the same or similar line of 

business who are not socially disadvantaged.

    (b) Submission of narrative and financial information. (1) Each 

individual claiming economic disadvantage must describe it in a 

narrative statement, and must submit personal financial information.

    (2) When married, an individual claiming economic disadvantage also



[[Page 367]]



must submit separate financial information for his or her spouse, unless 

the individual and the spouse are legally separated.

    (c) Factors to be considered. In considering diminished capital and 

credit opportunities, SBA will examine factors relating to the personal 

financial condition of any individual claiming disadvantaged status, 

including personal income for the past two years (including bonuses and 

the value of company stock given in lieu of cash), personal net worth, 

and the fair market value of all assets, whether encumbered or not. SBA 

will also consider the financial condition of the applicant compared to 

the financial profiles of small businesses in the same primary industry 

classification, or, if not available, in similar lines of business, 

which are not owned and controlled by socially and economically 

disadvantaged individuals in evaluating the individual's access to 

credit and capital. The financial profiles that SBA compares include 

total assets, net sales, pre tax profit, sales/working capital ratio, 

and net worth.

    (1) Transfers within two years. (i) Except as set forth in paragraph 

(c)(1)(ii) of this section, SBA will attribute to an individual claiming 

disadvantaged status any assets which that individual has transferred to 

an immediate family member, or to a trust a beneficiary of which is an 

immediate family member, for less than fair market value, within two 

years prior to a concern's application for participation in the 8(a) BD 

program or within two years of a Participant's annual program review, 

unless the individual claiming disadvantaged status can demonstrate that 

the transfer is to or on behalf of an immediate family member for that 

individual's education, medical expenses, or some other form of 

essential support.

    (ii) SBA will not attribute to an individual claiming disadvantaged 

status any assets transferred by that individual to an immediate family 

member that are consistent with the customary recognition of special 

occasions, such as birthdays, graduations, anniversaries, and 

retirements.

    (iii) In determining an individual's access to capital and credit, 

SBA may consider any assets that the individual transferred within such 

two-year period described by paragraph (c)(1)(i) of this section that 

SBA does not consider in evaluating the individual's assets and net 

worth (e.g., transfers to charities).

    (2) Net worth. For initial 8(a) BD eligibility, the net worth of an 

individual claiming disadvantage must be less than $250,000. For 

continued 8(a) BD eligibility after admission to the program, net worth 

must be less than $750,000. In determining such net worth, SBA will 

exclude the ownership interest in the applicant or Participant and the 

equity in the primary personal residence (except any portion of such 

equity which is attributable to excessive withdrawals from the applicant 

or Participant). Exclusions for net worth purposes are not exclusions 

for asset valuation or access to capital and credit purposes.

    (i) A contingent liability does not reduce an individual's net 

worth.

    (ii) The personal net worth of an individual claiming to be an 

Alaska Native will include assets and income from sources other than an 

Alaska Native Corporation and exclude any of the following which the 

individual receives from any Alaska Native Corporation: cash (including 

cash dividends on stock received from an ANC) to the extent that it does 

not, in the aggregate, exceed $2,000 per individual per annum; stock 

(including stock issued or distributed by an ANC as a dividend or 

distribution on stock); a partnership interest; land or an interest in 

land (including land or an interest in land received from an ANC as a 

dividend or distribution on stock); and an interest in a settlement 

trust.