September 6, 2023 Table of Contents Table of Contents Introduction Quick Overview of SBA Standards The Impact of SBA Standards on Real Estate Firms Contract Eligibility and SBA Standards Growth, Expansion, and SBA Standards Financial Structuring and SBA Standards SBA Loans and Real Estate Firms 8(a) Business Development Program and Real Estate Firms HUBZone Program and Real Estate Firms Women-Owned Small Business Federal Contract Program and Real Estate Firms The Impact of SBA’s Mentor-Protégé Program on Real Estate Firms How KatzAbosch Can Help Real Estate Firms Navigate SBA Standards Key Takeaways Navigating the intricate labyrinth of Small Business Administration (SBA) standards can be a complex task for any business, particularly those in the ever-evolving real estate sector. This blog aims to demystify these complexities, focusing specifically on the impact of SBA standards on Small and Medium-sized Businesses (SMBs) in the real estate industry. A Quick Overview of SBA Standards The SBA, a United States government agency, provides support to entrepreneurs and small businesses. A key aspect of their role involves defining what constitutes a “small” business. This definition, known as the SBA size standards, is not one-size-fits-all. It varies by industry, generally based on the number of employees or the amount of annual receipts a business has. To understand these standards, you need to know a few terms. “Affiliates” refers to businesses that are linked by the power to control, whether exercised or not. This power typically exists when an external party has 50% or more ownership. “Annual receipts” are the total income plus the cost of goods sold, averaged over the business’s latest five complete fiscal years. The “employee calculation” is the average number of people employed for each pay period over the business’s latest 24 calendar months. These standards are pivotal in determining whether a business qualifies to participate in government contracting programs and compete for contracts reserved or set aside for small businesses. Understanding and meeting these standards is a crucial first step for any SMB aiming to secure government contracts. The Impact of SBA Standards on Real Estate Firms The real estate industry, with its diverse range of business models and financial structures, is significantly influenced by SBA standards. These standards affect a variety of factors, from the eligibility for government contracts to the financial structuring of real estate firms. Contract Eligibility and SBA Standards One of the primary impacts of SBA standards on real estate firms is in the realm of contract eligibility. The SBA standards determine whether a real estate firm qualifies as a ‘small’ business and is thus eligible to compete for contracts reserved for such businesses. This can be particularly relevant for real estate firms that work with government agencies, either directly or indirectly. Growth, Expansion, and SBA Standards However, these standards also present unique challenges. For instance, a real estate firm that grows and expands may find itself no longer classified as ‘small’ according to SBA standards. This could potentially result in the loss of eligibility for certain contracts, impacting the firm’s growth trajectory and business strategy. Financial Structuring and SBA Standards SBA standards also influence the financial structuring of real estate firms. The standards around annual receipts and employee calculations can affect how real estate firms manage their finances and human resources. This could influence decisions around property acquisitions, partnerships, and project financing. SBA Loan Programs and Real Estate Firms The SBA offers various loan programs that can be particularly beneficial for real estate firms. These include the 7(a) loans, 504 loans, and microloans. These loans can provide real estate firms with the capital they need for various purposes, such as purchasing or repairing real estate, acquiring equipment, or expanding their operations. The terms of these loans are often more favorable than those of non-guaranteed loans, making them an attractive option for many real estate firms. One notable program was the Paycheck Protection Program (PPP), an SBA-backed loan that helped businesses keep their workforce employed during the COVID-19 crisis. Although the PPP ended on May 31, 2021, existing borrowers may be eligible for PPP loan forgiveness. This program was a lifeline for many real estate firms during the pandemic, allowing them to retain staff and maintain operations despite the challenging economic conditions. 8(a) Business Development Program and Real Estate Firms The SBA’s 8(a) Business Development program is another key area where SBA standards can impact real estate firms. This program is designed to help firms owned and controlled by socially and economically disadvantaged individuals. The 8(a) program provides training and technical assistance to strengthen these firms’ ability to compete effectively in the American economy. Real estate firms that qualify for the 8(a) program can benefit from one-on-one business development assistance, mentorship opportunities, and the ability to pursue joint ventures to increase capacity. The program also allows certified firms to compete for and receive set-aside and sole-source contracts, which can be a significant advantage in the competitive real estate market. However, to qualify for the 8(a) program, businesses must meet several eligibility criteria. These include being a small business, not having previously participated in the 8(a) program, being at least 51% owned and controlled by U.S. citizens who are socially and economically disadvantaged, and demonstrating good character and the potential for success. In conclusion, the SBA standards and programs can have a profound impact on real estate firms. They influence everything from contract eligibility and financial structuring, to access to capital and business development opportunities. As such, understanding and navigating these standards and programs is not just beneficial for real estate firms – it’s essential for their success and growth. HUBZone Program and Real Estate Firms The SBA’s Historically Underutilized Business Zones (HUBZone) program is another key area where SBA standards can impact real estate firms. This program fuels small business growth in historically underutilized business zones with a goal of awarding at least 3% of federal contract dollars to HUBZone-certified companies each year. The government limits competition for certain contracts to businesses in HUBZones and also gives preferential consideration to those businesses in full and open competition. Joining the HUBZone program makes your business eligible to compete for the program’s set-aside contracts. HUBZone-certified businesses also get a 10% price evaluation preference in full and open contract competitions. To qualify for the HUBZone program, your business must be a small business according to SBA size standards, be at least 51% owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, an Alaska Native corporation, a Native Hawaiian organization, or an Indian tribe, have its principal office located in a HUBZone, and have at least 35% of its employees living in a HUBZone. For real estate firms, this program can provide opportunities to secure contracts in these zones, contributing to the revitalization of the area while also growing their business. However, it’s important to note that the HUBZone map is changing on July 1, 2023, and firms need to check the new HUBZone map to determine if their principal office and employees will still be in a HUBZone once the new map goes into effect. Women-Owned Small Business Federal Contract Program and Real Estate Firms The Women-Owned Small Business (WOSB) Federal Contract Program is another SBA initiative that can significantly impact real estate firms. This program aims to level the playing field for women business owners by limiting competition for certain contracts to businesses that participate in the WOSB Federal Contract program. These contracts are for goods and services in specific industries where WOSBs are underrepresented. Joining the WOSB Federal Contract program makes a business eligible to compete for federal contracts reserved for the program’s certified participants. These contracts are known as “set-asides.” To be eligible for the WOSB Federal Contract program, a business must be a small business according to SBA size standards, be at least 51% owned and controlled by women who are U.S. citizens, and have women manage day-to-day operations and make long-term decisions. For real estate firms, this program can provide opportunities to secure contracts that may have been out of reach, contributing to the growth and diversification of their business. However, it’s important to note that WOSB certification benefits only apply to federal contracting opportunities rather than those in the private sector. The Impact of SBA’s Mentor-Protégé Program on Real Estate Firms The Small Business Administration (SBA) has a mentor-protégé program that is designed to help small businesses, including real estate firms, grow and develop their capabilities. This program allows larger, more experienced businesses (mentors) to provide assistance to smaller, less experienced businesses (protégés). The assistance can take various forms, including technical and management advice, financial assistance in the form of loans or equity investments, and help in securing government contracts. The mentor-protégé program is particularly beneficial for real estate firms that are looking to expand their operations and increase their competitiveness. By partnering with a larger, more experienced firm, a small real estate firm can gain valuable insights and advice that can help it navigate the complexities of the real estate market. The mentor can provide guidance on issues such as property acquisition, financing, property management, and marketing strategies. Moreover, the mentor-protégé program can also help real estate firms secure government contracts. The SBA’s regulations allow mentors and protégés to form joint ventures to bid on government contracts. This can provide small real estate firms with opportunities to participate in large-scale government projects that they would not be able to handle on their own. However, it’s important to note that the mentor-protégé program is not without its challenges. For instance, the program requires that the protégé firm must demonstrate annually what benefits it has derived from the mentor-protégé relationship. If the benefits provided to the protégé firm are minimal, or if it appears that the relationship has been used primarily to allow a non-small business mentor to benefit from contracts that it would otherwise not be eligible for, the SBA may terminate the mentor-protégé relationship. HOW KATZABOSCH CAN HELP Understanding and navigating the SBA standards is crucial for real estate firms. These standards not only determine contract eligibility but also influence financial structuring and access to capital. As such, they play a significant role in shaping the success and growth of real estate firms. If you’re a real estate firm seeking to navigate these standards, KatzAbosch can help. With our deep expertise and commitment to providing high-quality accounting and consulting services, we can guide you through the complexities of SBA standards. From understanding the nuances of SBA loan programs to navigating the eligibility requirements of the 8(a) Business Development program, our team of experts is equipped to provide the guidance and support you need. We can also help you understand the implications of the HUBZone and Women-Owned Small Business Federal Contract programs for your business. Moreover, we can assist you in leveraging the benefits of the SBA’s mentor-protégé program. Our team can provide insights into how to derive substantial benefits from your relationships with mentors and how to navigate the program’s challenges. In conclusion, navigating the SBA standards and programs is not just beneficial for real estate firms – it’s essential for their success and growth. And with KatzAbosch by your side, you can confidently navigate these standards and programs to maximize your business’s potential. To learn more about how KatzAbosch can help your business navigate SBA standards, contact us today. Key Takeaways Understanding SBA Standards: The Small Business Administration (SBA) standards define what constitutes a ‘small’ business, which is crucial for real estate firms. These standards vary by industry and are generally based on the number of employees or the amount of annual receipts a business has. Impact on Contract Eligibility: SBA standards determine whether a real estate firm qualifies as a ‘small’ business and is thus eligible to compete for contracts reserved for such businesses. However, as a firm grows and expands, it may no longer be classified as ‘small,’ impacting its eligibility for certain contracts. Influence on Financial Structuring: SBA standards can affect how real estate firms manage their finances and human resources. Firms may need to strategize their hiring practices or financial management to ensure they stay within the SBA size standards and retain their ‘small’ business status. SBA Loan Programs: The SBA offers various loan programs that can be particularly beneficial for real estate firms. These include the 7(a) loans, 504 loans, and microloans. These loans can provide real estate firms with the capital they need for various purposes, such as purchasing or repairing real estate, acquiring equipment, or expanding their operations. 8(a) Business Development Program: The SBA’s 8(a) Business Development program is designed to help firms owned and controlled by socially and economically disadvantaged individuals. Real estate firms that qualify for the 8(a) program can benefit from one-on-one business development assistance, mentorship opportunities, and the ability to pursue joint ventures to increase capacity. HUBZone Program: The SBA’s Historically Underutilized Business Zones (HUBZone) program fuels small business growth in historically underutilized business zones with a goal of awarding at least 3% of federal contract dollars to HUBZone-certified companies each year. Women-Owned Small Business Federal Contract Program: The Women-Owned Small Business (WOSB) Federal Contract Program aims to level the playing field for women business owners by limiting competition for certain contracts to businesses that participate in the WOSB Federal Contract program. Mentor-Protégé Program: The SBA’s mentor-protégé program allows larger, more experienced businesses (mentors) to provide assistance to smaller, less experienced businesses (protégés). This can provide small real estate firms with opportunities to participate in large-scale government projects that they would not be able to handle on their own. Navigating SBA Standards with KatzAbosch: KatzAbosch can guide real estate firms through the complexities of SBA standards. With deep expertise and a commitment to providing high-quality accounting and consulting services, KatzAbosch can help firms navigate these standards effectively.
