New Law Requires Minority Business Owners To Write An Essay Proving 'Social Injustice' To Qualify For SBA 8(a) Loans

According to Business Insider, the Supreme Court’s decision to end affirmative action when it comes to college admissions is now affecting business owners in a huge way.

In response to a July 2023 ruling by a federal judge in Tennessee, the U.S. Small Business Administration (SBA) will now require minority entrepreneurs to write an essay to prove that their race is a “social disadvantage” when seeking certain loans from the SBA.

The judge “issued a ruling that challenged the Small Business Administration’s 8(a) Business Development program, which was created for the government to give at least 5% of all federal contracting dollars to disadvantaged small businesses each year.”

Based on the judge’s decision, a key provision of the program no longer exists. Now, business owners aren’t allowed to use race as a reason for facing disadvantages in the U.S.

“The determination of which groups of Americans are presumptively disadvantaged compared with others necessarily leads to such a determination being underinclusive because certain groups that could qualify will be left out of the presumption,” read the July 19 opinion filed by the judge.

Due to the new legislation, the process in which small business owners receive funding through the SBA’s 8(a) program has changed.

As of late August, all 8(a) participants are now required to complete a “social disadvantage narrative” should they wish to continue to receive monetary awards through the incentive.

“SBA must determine that the discrimination or bias experienced by an individual is chronic, substantial, and has occurred within American society (not another country),” read the guidance filed in July. “Additionally, the discrimination must have negatively impacted the individual’s entry or advancement in the business world.”

Per the report, the aforementioned narrative must list how the business owners are victims of social disadvantages and must include an example of when the bias occurred under that notion.

A “sufficient” narrative, according to the guidance, is at least three pages long and includes “a who, what, where, why, when, and how the discrimination occurred.”

In a statement, SBA Administrator Isabella Guzman provided assurance that the current administration is doing all that it can to support small businesses during this time.

“The SBA and Biden-Harris Administration remain committed to supporting this crucial program and the small business owners who have helped drive America’s strong economic growth,” Guzman said.

As of this writing, it has not yet been made clear whether the Biden-Harris Administration will appeal the 8(a) ruling.