Start-Up Exception May be Saving Grace for Small Business

SBA OHA Reaffirms (Some) Leniency to Start-Ups in Size Determinations

New small businesses may be able to use the “start-up” exception when trying to earn new government business.

Source: SmallGovCon, Article written by Mattew Schoonver, published September 4, 2015

Under the SBA’s small business affiliation regulations, an otherwise small business can be deemed affiliated with a larger business when the firms share “substantially identical business or other interests.” Under this rule, affiliation will be typically be found, as a matter of law, when a small business concern derives 70% or more of its revenue from another firm.

Because most new businesses don’t start up with numerous clients or contracts, a mechanical application of the 70% rule could be disastrous for a new small business faced with an SBA size determination. Thus, the “start-up” exception to the SBA’s affiliation rules—which applies to relatively new businesses whose revenues from its alleged affiliate are insufficient to sustain business operations—can be the saving grace for a small business trying to earn business from the government.  MORE….

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SBA’s 70% rule could exclude many small businesses from seeking government contracts. Contact your nearest PTAC to see if your business meets the criteria for an exception.

 For help with Government Contracting: contact your nearest Procurement Technical Assistance Center (PTAC). Funded through Cooperative Agreements between the U.S. Department of Defense and state and local governments/institutions, PTACs provide free and low-cost assistance in virtually all areas of government contracting.