A small disadvantaged business is a small business that is at least 51% owned, operated, and controlled by one or more individuals who are both socially and economically disadvantaged.
The Small Business Administration (SBA), through its 8(a) Business Development Program, establishes the guidelines and oversees the certification of small disadvantaged businesses.
Socially disadvantaged individuals are defined as those that have been, historically, the target of negative prejudice based on their race or ethnicity within the larger American culture.
According to the SBA a socially disadvantaged person is someone "...who has been subjected to racial or ethnic prejudice or cultural bias within American society, because of their identification as a member of a group without regard to their individual qualities." The following groups are considered to be socially disadvantaged by the SBA:
Black Americans
Hispanic Americans
Native Americans
Subcontinent Asian American
Economically disadvantaged individuals are defined as those that have an abnormally difficult time gaining access to financial (credit and capital) opportunities, and as a result have had increased difficulty competing in the free market, in contrast to people with similar business who are not identified as socially disadvantaged.
There are no specific guidelines on the exact qualifications to be certified as an economically disadvantaged individual. Generally, however, the SBA requires the individual to be socially disadvantaged, as well as have a net worth of under $250,000.
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