Q: The SBA Self Representation as a Small Business Concern form asks the applicant to affirm that their small business is operating profitably. What defines operating profitably?
A: The SBA requires that recipients of STEP matching grants are operating profitably. We have chosen to review whether the applicant reported a net-income or a net-loss on their most recent annual report as the standard for determining operating profitably. If a net-income is reported, then we consider the company to be operating profitably.
51% U.S. Content
Q: The application asks the applicant to affirm that they have a product or qualifying service that has at least 51% U.S. content. What defines 51% U.S. content?
A: State Trade and Export Promotion (STEP) matching grant awards are made to organizations that have a product or qualifying service that has at least 51% U.S. content. This criterion typically applies only to companies that manufacture a product. For example, if all of the components of a company’s manufactured good are manufactured in the United States and all of the components are assembled into the final good in the United States, then the product is clearly manufactured in the United States and meets the criterion. However, if components or materials used to make the final product are sourced from foreign markets, then it becomes necessary to demonstrate that a substantial transformation of those materials has occurred in the United States thus qualifying the product as having at least 51% U.S. content.
For example, sheet metal that is sourced from China and machined into a new toolbox in the United States has undergone a substantial transformation and meets the requirement. On the other hand, toolboxes sourced from China that have handles attached, labeling affixed, and are packaged in the United States have not undergone a substantial transformation. They were toolboxes when they left China and they are still toolboxes in the United States.
We invite you to review our Substantial Transformation Questionnaire for additional guidance to help you determine whether or not your product meets this requirement.
3 or More Full-time Employees (FTEs)
Q: The eligibility criteria indicates that applicants must have 3 or more full-time employees. What defines 3 or more full-time employees?
A: Applicants are required to employ at least 3 full-time employees to qualify to receive a STEP matching grant. The only exception is for applicants applying to receive the Certificate of Global Business Management Matching Grant. The Fair Labor Standards Act (FLSA) does not define full-time employment or part-time employment. This is a matter generally to be determined by the employer.
The standard for full-time was typically 40 hours a week in the past, however many employers consider employees as full-time working different schedules i.e. over 30 hours, 35 hours, 37.5 hours, etc. Full-time employees may be provided with benefits, including a pension, health insurance, paid vacation, and sick time, that are not offered to part-time employees. However, there are no requirements for employers to provide benefits to employees other than those mandated by law.
For purposes of the STEP grant, the applicant needs to employ at least 3 full-time employees that are not considered part-time. They must be employed by the applicant company and cannot be leveraged through contracts or agreements with other companies, suppliers, etc.