Posted on September 12, 2023

Business Owners of Color Seeking SBA Loans Now Have to Write an Essay Proving Their Race Is a ‘Social Disadvantage’ After a Judge Ruled It Isn’t Enough

Ayelet Sheffey, Insider, September 8, 2023

The Supreme Court struck down affirmative action in college admissions — but business owners are also feeling the heat.

In July, a federal judge in Tennessee 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. The judge’s decision struck down a key provision of that program, saying that business owners could no longer say their race is the reason they have faced disadvantage in America.

The judge wrote in the July 19 opinion that “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.” The opinion gave an example that while some minority groups have faced “significant discrimination in a number of areas,” they are not considered “presumptively socially disadvantaged.”

This ruling prompted the SBA to change the process for small business owners to receive funds though the 8(a) program. According to the new guidance posted in late August, the SBA is now requiring all 8(a) participants to complete a “social disadvantage narrative” if they want to continue receiving awards through the program.


Still, the ruling on the 8(a) program could signal legal challenges down the road for other programs that prioritize minority groups. {snip}