At Risk

President Richard Nixon started the 8(a) program in response to conclusions made by the Kerner Commission on Civil Disorder, which met in 1967 after urban riots resulting from racial unrest. The commission said blacks needed "special encouragement" to enter the economic mainstream. The program initially was reserved for the socially or economically disadvantaged; those terms were not defined. But in 1973, the SBA listed five groups "presumed" to fit that category: African Americans, American Indians, Spanish Americans, Asian Americans and Puerto Ricans. Today, a long list of ethnic groups are presumed eligible.

The 8(a) program is envisioned as a starter program for minority businesses (companies must leave the program after nine years). Many minority firms have used the 8(a) program to boost themselves up, eventually leaving the program to thrive. Steven Farinha, president of Farinha Inc., dba Paragon Construction, in Auburn, California, founded his company in 1983 "with a pickup truck, a dog and $500." He was certified by the 8(a) program in 1989 and received his first contract two years later. The company now employs 100 people and does about

$17 million a year. "I cannot stress enough how essential the 8(a) program has been to my success," Farinha says. Some 35 percent of his company's revenue comes from 8(a) contracts.

This article was originally published in the February 1997 print edition of Entrepreneur with the headline: At Risk.