Menu Close

Small Business Resources

What is the importance of HUBZone?

What is a hubzone?

In this post, we’ll begin exploring another crucial program for tiny businesses. HUBZone is an organization level diversity certification. Relating the Historically Underutilized Business Zone program that helps little businesses. Economically distressed areas gain advantage through Hubzone with federal contract opportunities.

The HUBZone program is positioned to create job opportunities, investment and economic development in these areas. The Small Business Administration (SBA) regulates and implements this program.

Normally distressed rural and concrete communities get the designation of HUBZones. Sometimes having low median social incomes, high state or both. The knowledge gathered from various agencies determines the placement:

  • Department of Housing and Urban Development (HUD),
  • The Bureau of the Census,
  • The Bureau of Labor Statistics (BLS),
  • The Department of the Interior,
  • Bureau of Indian Affairs,
  • The Department of Defense.

Which geographic areas fall in an exceedingly HUBZone?

The Department of Housing and Urban Development determines which areas qualify as HUBZones. With respect to the newest census data. The SBA then publishes maps that show whether or not an address falls among the designated zone.

Economically depressed geographic areas benefit from the economic supply the program provides. Thus small businesses located and that use employees in the areas are awarded federal contracts.

Who is eligible to Be a HUBZone business?

To be eligible for HUBZone certification, a company should be a small business (according to SBA standards). U.S. citizens must control a minimum of 51%. Or by a Community Development Corporation, an agricultural cooperative or an Indian tribe.

Being set within a “Historically Underutilized Business Zone”. Not to mention at least 35% of its staff must reside in an exceedingly area.

Also companies that want to become hubzone certified should complete an internet application on the SBA’s site. Further documentation is necessary even after application process.

Companies must renew every 3 years. Unless it is decided that a company no longer meets all of the program needs. As long as all eligibility requirements continue, so can the certification.

eligibility requirements

There are four basic necessities a “typical” company should meet to participate within the HUBZone program:

  • United states citizens should control a minimum of 51% of the company.
  • The company should be start up business beneath its primary NAICS code;
  • The company’s principal workplace should be settled in an exceedingly HUBZone;
  • At least 35% of the issues workers reside in a hubzone.

These are simply the fundamental criteria. The last 2 necessities include their own quirks. It’s worth keeping in mind that these are the requirements for typical HUBZones. That is, those in hand by individuals.

Companies owned by the following have separate requirements:

When is eligibility determined?

HUBZone eligibility is an on-going process. Thus a company needs to qualify at the time it submits its application. Consequently once on the job, the small business must “attempt to take care of” its compliance with the regulations. Thus at the time of bid and award, the company must be in compliance. Actual compliance with all requirements. Not simply be trying to maintain compliance.

Consider the following scenario: a business has ten workers, 4 of whom reside in an exceedingly HUBZone. If one of the residing employees takes employment elsewhere before the award is made can influence a lot.

At the time of the bid, 40% of its employees lived in a HUBZone. Thus at the time of the award, solely 30% did. Through no fault of its own, the start up wouldn’t be eligible for the award.

We’ve seen this situation happen many times and have defended protests on HUBZone eligibility under similar conditions. Maintaining 35% residency supports the underlying goal of the HUBZone program. How would an economically depressed space enjoy the advantages from a HUBZone contract? Especially if its residents aren’t hired to perform the work?

Though it would sound difficult, maintaining eligibility isn’t not possible for many firms. It simply takes a bit of vigilance and a strong, effective compliance plan.

What’s the profit to participating?

The pros to taking part within the HUBZone program may be huge. The government’s goal is to award 3% of its prime contracts to HUBZone businesses annually. Contracting officers are given broad powers to award contracts to these start ups. For contracts issued beneath full and open competition, moreover, HUBZone firms receive a worth analysis preference.

Is it too good to be true?

There is an annual conference that provides an amazing chance for HUBZone business homeowners and companies to network. Not only that but to also find potential partners that can help them winning business contracts with the federal government.

Unfortunately, such events may attract evil company executives who are on the search for a HUBZone business. Thus to lawlessly use as a pass through to achieve access to moneymaking federal contracts. Contracts that normally might well be out of reach. Luckily there are proactive steps a business will take to shield itself and also the integrity of the program.

The SBA created this program to encourage business development in economically challenged areas. Simultaneously federal agencies goal is to award as a minimum 3% of all federal dollars. Roughly $15 billion to HUBZone approved businesses every year.

The program was designed to supply legitimate small businesses with a path to put their foot in the door. The contracts with the federal government have made the program a target for fraud.

Program Protection

Understandably, many start up businesses are unable to fufill the requirements of a federal contract on their own. So they partner with giant corporations. There are legal ways to create such a partnership. The SBA provides intensive steerage in a way to do so.

However, HUBZone businesses are generally approached with a proposal to log off as a partner on a contract. Not preforming the work required while benefiting.

Experienced HUBZone businesses usually refuse to engage in these styles of deals. Large businesses are bent on establishing a pass-through with an approved organization. Typically they’re going to use conferences to lobby to several potential partners till somebody says “yes.”

In different cases, giant businesses and firms are extremely covert. Disguising their intent to use a HUBZone organization as a pass through. Sometimes months after partnering, the organization might notice their company partner slowly getting down to squeeze them out. Squeezing them out of performing the work that they are contracted. Whereas still continued to pay them. In these situations, the work arrangement starts to seem and feel less sort of a partnership. Eventually more just like the HUBZone business is simply getting used. If it’s being used for its certification, it can be time for a more in-depth check. To verify if the larger business is committing fraud.

Contractor fraud in these cases may be troublesome to discover and prove.
Even though the fact of the matter is that it is wrong little ever reports. A small proportion of fraud cases ever end up in a courtroom.

To enforce and police their industry approved contractors play a key role. In particular, there are variety of ways for approved business homeowners to guard themselves. Consequently also the program from these attacks of fraud.

How to protect your business

First, if you’re a approved business owner you could be approached at a convention. Any convention just like the National HUBZone Conference to become a “pass through” for a bigger corporation. Make sure to keep your eyes and ears open.

The company who offered you a great deal, most likely will offer it to others. Usually they pursue your peers till somebody agrees to their terms.

Second, if you’re a approved business that enters into a partnership with a bigger organization protect yourself. Confirm you have got a tightly outlined contract and scope of labor. The portion of work required by your company being outline in the contract.

Furthermore as what the work will entail. It is essential to establish at the start of the relationship these legal documents. It’ll be terribly troublesome for a company partner to try to squeeze you out of a partnership.

Third, and most importantly, it’s crucial that approved businesses have a strong backbone to stand-up to company executives. Instead of giving in and accepting payment in exchange for the utilization of their certification. Furthermore if you’re in a partnership, insist that you just perform the work.

Even if your corporate partner pressures you not to. Shield yourself and your company by walking away from offers that seem “Too good to be true”. Whenever in doubt, ask a lawyer.

Advantages of HUBZone

Preferential access isn’t the sole key advantage of approved status. Sole supply acquisitions will move quickly finishing in thirty days. Thus saving valuable time and energy for all stakeholders.

Additionally, this certification usually permits corporations that otherwise won’t be able to contract directly with a specific agency. To try and do so, gap up a wider pool of vendors to assist you meet your needs.


How are you able to start operating with a expert firm? One useful tool for potential service suppliers is termed the DYNAMIC SMALL BUSINESS SEARCH. Searchable information of approved corporations maintained by the U.S. SBA. The search tool will put you into direct contact with vendors. Supported factors as well as industry, geography, and more.