A Small Disadvantaged Business (SDB) is a small business that is at least 51 percent owned by one or more individuals who are both socially and economically disadvantaged. SDB status makes a company eligible for bidding and contracting benefit programs involved with federal procurement.
A publicly-owned business may be considered an SDB if at least 51 percent of its stock is unconditionally owned by one or more such individuals and if the public company's management and daily business is controlled by one or more such individuals.
The Small Business Administration (SBA) defines socially disadvantaged groups as those who have been, historically, subjected to "racial or ethnic prejudice or cultural bias" within the larger American culture. Identified groups include: African Americans, Asian Pacific Americans, Hispanic Americans, Native Americans and Subcontinent Asian Americans. Members of other groups may qualify if they can satisfactorily demonstrate that they meet established criteria.
Economically disadvantaged individuals are defined as those for whom impaired access to financial opportunities has hampered the ability to compete in the free enterprise system, in contrast to people in similar businesses who are not identified as socially disadvantaged.
Originally, businesses had to be certified by the SBA to qualify for SDB status. Since October 2008, companies have been able to self-certify. However, a business owner should read the definitions carefully and prepare a defense for any potential challenges to the company's SDB status.