Eligibility Requirements

Any small business wanting to take advantage of the SDB Program must meet specific social, economic, ownership, and control eligibility criteria. To qualify as a Small Disadvantaged Business (SDB), the business must be a small business concern that is at least 51 percent owned and controlled by one or more individuals who are both socially and economically disadvantaged.

Social disadvantage. Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities. The social disadvantage must stem from circumstances beyond their control.

Warning Caution To receive the benefits of the SDB Program, a small business must be certified by the SBA that it meets all of the requirements.

The U.S. population is broken down into two groups: designated groups and non-designated groups. For designated groups, the law allows for a presumption of discrimination. However, keep in mind that the presumption of discrimination may be rebutted.

Businesses whose owners are members of one of the following groups are presumed to qualify:

• African American
• Hispanic American
• Native American (American Indians, Eskimos, Aleuts, or Native Hawaiians)
• Asian-Pacific American (persons with origins from Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei, Japan, China, Taiwan, Laos, Cambodia (Kampuchea), Vietnam, Korea, The Philippines, U.S. Trust Territory of the Pacific Islands (Republic of Palau), Republic of the Marshall Islands, Federated States of Micronesia, the Commonwealth of the Northern Mariana Islands, Guam, Samoa, Macao, Hong Kong, Fiji, Tonga, Kiribati, Tuvalu, or Nauru)
• Subcontinent Asian (Asian-Indian) (American persons with origins from India, Pakistan, Bangladesh, Sri Lanka, Bhutan, the Maldives Islands, or Nepal)

Individuals in non-designated groups can qualify if they can successfully make an argument for discrimination based on certain types of evidence, which include all of the following:

• At least one objective distinguishing feature that has contributed to social disadvantage such as gender disability, sexual orientation, or living in an economically isolated community
• Personal experiences of substantial and chronic social disadvantage
• Negative impact on one's education, employment entry, and advancement in the business world.

Economic disadvantage. 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.

In assessing the personal financial condition of an individual claiming economic disadvantage, his or her net worth may not exceed the limit set by law. All individuals must have a net worth of less than $750,000, excluding the equity of the business and primary residence.

Successful applicants must also meet applicable size standards for small businesses in their industry.

Once a firm has self certified, it is added to the online registry of SDB-Self Certified firms maintained in the CCR and Dynamic Search Databases. Certified firms remain on the list for three years. Contracting Officers and large business prime contractors may search this online registry for potential suppliers.

Warning Requiring certification for subcontracts is not required by law, and may contradict the express language of the Small Business Act. In this regard, section 8(d)(3)(F) of the Small Business Act (15 USC 673(d)(3)(F)) states: "Contractors acting in good faith may rely on written representations by their subcontractors regarding their status as a small business concern owned and controlled by socially and economically disadvantaged individuals." This language clearly suggests that Congress intended to allow large business prime contractors to rely on the self representation of subcontractors claiming to be SDBs.