Mentor-Protégé Program: Changes are Coming!

By Rebecca Barbour, SBTDC/PTAC Counselor at the North Carolina State University

The 2013 National Defense Authorization Act called on the SBA to create mentor-protégé programs for all small businesses. It has taken some time, but the SBA has now published their proposed rule for a new Small Business Mentor-Protégé program.  Highlights of the program are listed below:

Mentors: Under the proposed rule, any for-profit business concern that demonstrates a commitment to developing other small business concerns may be approved as a mentor. Generally, a mentor will only have one protégé, but may be allowed up to three protégés in some circumstances.

Proteges: Any business considered small in its primary NAICS code may be eligible as a protégé under the proposed rule. As part of the new program, the SBA would be required to verify that a firm is in fact a small business before approving their mentor protégé relationship. Benefits of Mentor-Protégé Relationships: As with the 8(a) program, the new rule would allow small businesses to joint venture with their approved mentors and qualify as a small business. The rule also allows for an approved mentor to own up to an equity interest of up to 40% in the protégé firm.

Mentor-Protégé Agreements: The proposed rule requires that all mentor protégé agreements be approved by the SBA. The rule also allows for the SBA to create limits on when agreements will be accepted or how many agreements will be accepted, depending on how many small businesses participate.

Other Agency Mentor-Protégé programs: The new rule would require that all other agencies (except the Department of Defense) obtain approval for their mentor protégé programs from the SBA. Agencies will be allow a one year grace period to continue operating their programs before this approval will be required.

Even though the rule is not final, it is certainly an exciting opportunity for many small businesses. All interested business concerns should read the full proposed rule and submit any comments that they have to the SBA.

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