[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: 13CFR124.112]



[Page 378-380]

 

                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. 124.112  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 Sec. 124.101 through Sec. 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 Sec. 124.112 to the extent that they are not inconsistent with 

Sec. 124.109, Sec. 124.110 and Sec. 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



[[Page 379]]



that fails to meet the eligibility requirements after being admitted to 

the program will be subject to termination or early graduation under 

Sec. Sec. 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 Sec. 124.101 through Sec. 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 Sec. 124.520(b)(4) for additional 

annual requirements;

    (7) IRS Form 4506, Request for Copy or Transcript of Tax Form; and

    (8) Such other information as SBA may deem necessary. For other 

required annual submissions, see Sec. Sec. 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.

    (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: officer's salary; cash dividends; 

distributions in excess of amounts needed to pay S Corporation taxes; 

cash and property withdrawals; bonuses; loans; advances; payments to 

immediate family members; investments on behalf of an owner, officer, or 

key employee; acquisition of a business not merged with the 8(a) 

Participant; charitable contributions; and speculative ventures.

    (2) If SBA determines that excessive funds or other assets have been 

withdrawn from the Participant, SBA may:

    (i) Initiate termination proceedings under Sec. Sec. 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 Sec. Sec. 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.



[[Page 380]]



    (3) Withdrawals are excessive if during any fiscal year of the 

Participant they exceed (i) $150,000 for firms with sales up to 

$1,000,000; (ii) $200,000 for firms with sales between $1,000,000 and 

$2,000,000; and (iii) $300,000 for firms with sales over $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.



                     Applying to the 8(a) BD Program