Disadvantage

An Economically Disadvantaged individual or business is defined by the U.S. Small Business Administration (SBA) as meeting specific financial criteria related to personal net worth, adjusted gross income (AGI), and fair market value of assets. This designation is primarily used to determine eligibility for federal small business contracting programs, such as the 8(a) Business Development Program and the Economically Disadvantaged Women-Owned Small Business (EDWOSB) program.

The key purpose of this designation is to ensure that federal assistance and set-aside contracts are directed toward firms whose owners possess limited personal resources compared to the general population.

Key Financial Criteria (For Program Eligibility)

To qualify as economically disadvantaged for SBA programs, the individual owner(s) must generally meet the following limitations (note: these thresholds are subject to change by the SBA and often reviewed annually):

Personal Net Worth (PNW): The individual's PNW must be less than $850,000. This calculation excludes the value of the individual's ownership interest in the applicant firm and the equity value of their primary residence.

Adjusted Gross Income (AGI): The individual's AGI, averaged over the three preceding tax years, must be $400,000 or less.

Fair Market Value of Assets (FMVA): The total fair market value of all assets (excluding the value of the business and primary residence) must be $6.5 million or less.

If the business is also a Women-Owned Small Business (WOSB), meeting the economically disadvantaged criteria allows the firm to compete for set-aside contracts specifically reserved for EDWOSBs.