Legal Bulletins

This is the first in a two-part series on the SBA’s new rule and the key changes affecting contractors. Read part 2 here. 

What new and pending applicants must prove and what existing participants, teaming partners, and buyers should do now.

TL;DR. Beginning September 10, 2026, a new or still-pending individually owned 8(a) applicant may no longer rely on a racial or ethnic presumption, or the former personal-narrative test, to establish social disadvantage. The applicant must present evidence of group-based discrimination or bias and self-certify that the owner suffered a resulting loss of access to, or diminished opportunity for, economic advancement. Existing 8(a) participants do not have to reestablish social disadvantage solely because of the new rule.

A formal change, and part of a larger shift

On August 11, 2026, the SBA issued a final rule revising 13 C.F.R. § 124.103, the regulation governing how an individual establishes social disadvantage for purposes of the 8(a) Business Development Program. The rule takes effect September 10, 2026, and applies to every individually owned applicant that has not been admitted to the 8(a) program by that date, including applications already pending.
Importantly, the rule does not end the 8(a) Program. Nor does it reduce the dollar value of contracting opportunities available through the Program. Rather, it changes the proof required by individual owners.

The change also did not begin with a clean slate. Since the 2023 decision in Ultima Services Corp. v. USDA, SBA has been enjoined from using the former rebuttable presumption that members of specified racial and ethnic groups were socially disadvantaged. As a result, during the interim, applicants generally submitted individualized narratives. The final rule now removes the presumption from the regulation and replaces the narrative-based approach with a new evidence-and-certification framework.

Who is and is not affected

The new rule applies to all new individually owned 8(a) applicants beginning September 10, 2026. It also applies to individually owned firms whose applications remain pending on that date, even if they submitted their applications before the rule became effective.

By contrast, current individually owned 8(a) participants will not be required to reestablish social disadvantage solely because of the new rule. SBA considers social disadvantage a one-time determination. Existing participants must, however, continue to satisfy the Program’s other ongoing eligibility and compliance requirements.

The rule also does not affect entity-owned firms, including firms owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations, and Community Development Corporations.

The new two-part test

Satisfying the new social-disadvantage test does not automatically qualify a business for the 8(a) Program. The applicant must still satisfy the Program’s other eligibility requirements, including applicable standards concerning small-business status, ownership and control, economic disadvantage, good character, potential for success, and prior participation.

Accordingly, the new rule may expand the range of individuals who can establish social disadvantage, but it does not expand the Program to every person who has experienced discrimination.

The revised regulation defines “material harm” as a loss of access to or diminished opportunities related to economic advancement. An applicant must therefore satisfy both parts of the following test:

• Objective evidence of group discrimination or bias. The owner must show that, during the owner’s lifetime, a government or private entity in the United States discriminated or was biased against a clearly definable racial, ethnic, or cultural group to which the owner belongs, or alternatively favored a group to which the owner does not belong.
   
• Individual certification of resulting harm. The owner must self-certify both that the owner belonged to the relevant group at the time and that the identified policy, practice, or action caused the owner material harm.

The regulation identifies potentially sufficient evidence, including government, university, and corporate policies; website materials; statements by officials; reports, audits or findings; court decisions; administrative rulings; and specific congressional findings. If evidence concerning the particular entity is not readily available, the applicant may present other adequate evidence of the discrimination or bias.

What must be proved and how: examples grounded in SBA’s rule

Example 1: A woman denied the ability to establish credit in her own name

What establishes group discrimination: A bank policy in effect before the Equal Credit Opportunity Act of 1974 prohibited women from applying for or obtaining credit cards in their own names. A historical bank policy, government report, congressional finding, or other reliable contemporaneous source could likewise document the group-based barrier.

What the owner must establish: The owner would certify that she was a member of the affected group during the policy’s effective period and that the restriction materially harmed her for example, by preventing her from establishing an independent credit history and thereby diminishing her access to capital or other economic opportunities.

Important limitation: Note, the existence of historical discrimination alone is not enough. The owner must certify a causal connection between the identified barrier and her own diminished economic opportunity.

Example 2: An individual with a disability affected before enactment of the ADA

What establishes group discrimination: SBA states that Congress’ findings supporting the Americans with Disabilities Act of 1990 can constitute evidence that people with disabilities experienced pervasive discrimination that diminished economic opportunity.

What the owner must establish: The owner would certify that the owner had a disability covered by the ADA, was alive during the relevant pre-ADA period, and experienced material harm from the documented discrimination for example, diminished access to employment, education, facilities, or another opportunity tied to economic advancement.

Important limitation: The final regulatory text continues to use the statutory concepts of racial or ethnic prejudice and cultural bias. This disability-related example appears in SBA’s explanatory preamble and should be applied carefully to the applicant’s particular facts.

Example 3: Exclusion from a government program or contracting opportunity

What establishes group discrimination: The owner could identify a statute, regulation, program rule, agency guidance, court decision, administrative ruling, or official report showing that an identifiable group faced a barrier to a federal, state, or local program or contract while another group did not.

What the owner must establish: The owner would certify group membership at the relevant time and explain the resulting material harm—such as loss of access to a contracting channel, diminished opportunity to compete, or declining to apply because the documented barrier made participation unavailable or futile.

Important limitation: A generalized claim that government contracting was difficult will not identify the required policy or group-based barrier. The applicant should connect a specific, documented practice to a concrete loss or diminished opportunity.

Example 4: A practical proof file based on a corporate policy

What establishes group discrimination: Suppose a corporation maintained a written supplier, credit, hiring, promotion, or business-development policy that favored one identifiable racial, ethnic, or cultural group or disadvantaged another. The applicant could use the written policy, corporate statements, an audit or investigation, a court decision, or an administrative finding—the evidence categories SBA expressly recognizes.

What the owner must establish: The owner would need to establish membership in the affected group during the policy period and self-certify the economic consequences, such as being denied supplier access, losing a promotion that would have enabled business formation, receiving diminished access to credit, or losing another identifiable path to economic advancement.

Important limitation: This is a practical illustration, not an SBA adjudication. The strength of the claim will depend on the reliability of the policy evidence and the specificity of the owner’s causal account.
 

For more information about crowdfunding or corporate governance, please contact our  Business Law team.

Julian A. Haffner
410-576-4021 • jhaffner@gfrlaw.com