VA verification vs. SBA mentor-protege:
How can vets participate in both?
Veteran small business owners are being cautioned to watch out for pitfalls if they want to participate in the Small Business Administration’s new mentor-protege program as well as in the Veterans Affairs Department’s Vets First Verification program.
Potential areas of conflict are in maintaining the veteran’s ownership and control over the firm, according to Scott Denniston, executive director of the National Veterans Small Business Coalition.
“The first issue is ownership,” Denniston told Set-Aside Alert. “The second, and more important issue, is control,” Denniston said.
The SBA published the final rule for its new “All Small Mentor-Protege Program” in July. Applications will be accepted starting on Oct. 1.
Under the rule, a mentor may own up to 40% of a protege.
Under the VA’s rules, the veteran must own 51% of the small business to be verified or to maintain verification.
Some veteran-owned firms have a number of owners with various structures. “If you give away 40%, will the company still be 51% owned by the vet?” Denniston asked.
The greater difficulty is that mentors often provide loans, advice and program management support to the protege, which could make it difficult to ensure whether the veteran owner is still sufficiently in control to meet the VA’s verification standards, Denniston said.
“If you give up too much control to the mentor, there is a likelihood that the VA would not approve your verification,” Denniston said. “There could be serious control issues.”
Denniston advised VA-verified companies to review their proposed SBA mentor-protege agreements with the VA before signing the agreements, to be assured that their verification is safe.
“See if your mentor-protege agreement is acceptable to the VA,” Denniston advised.
For a veteran small business owner who is just getting started in federal contracting and is not yet verified at the VA, there may be a choice ahead: between the SBA’s new mentor-protege program and the VA’s Vets First.
Veterans should be aware that if they give up too much ownership and control to the mentor they may not qualify for VA verification.
A number of veteran small business owners have expressed interest in participating in the SBA’s new program.
Denniston also cautioned veterans to be wary of “predatory mentors” who take advantage of their role and may not follow through on their promises.
