SBA Adjusts Small Business Size Standards

The SBA has increased small business size standards affecting businesses in 46 industries in North American Industry Classification System Sector 42, Wholesale Trade, and in one industry in Sector 44-45, Retail Trade.
The SBA retained the current size standards for the remaining industries in those sectors.
The final rule was published in the Federal Register on Jan. 25 and will be effective Feb. 26, 2016.
As part of the review of all size standards under the Small Business Jobs Act of 2010, the SBA reviewed 73 employee-based size standards in those sectors to determine whether they should be revised or retained.
The revised size standards would define the maximum number of employees a firm in these industries could have and still be a small business.
The revisions primarily affect the eligibility for SBA’s financial assistance programs.
Nearly 4,000 more firms will become eligible for SBA’s loan programs under the revised size standards.
SBA also retained the current 500-employee size standard for federal procurement of supplies under its non-manufacturer rule.

Wholesale Trade and Retail Trade NAICS codes and their size standards do not apply to procurement of supplies.
Therefore, the revisions do not affect the eligibility for contracting opportunities for small businesses.
In reviewing size standards, SBA takes into account the structural characteristics of individual industries, including average firm size, startup cost and entry barriers, the degree of competition, and small business share of federal government contracting dollars.
This ensures that small business size definitions reflect current economic conditions and federal marketplace in those industries.
Under the Jobs Act, SBA is required to review all size standards at least every five years.
New Rule to Adjust Monetary Based Size Standards for Inflation
The SBA has also finalized an interim final rule that adjusts monetary based small business size standards (i.e., receipts, assets, net worth and income) for inflation.
The final rule was published in the Federal Register on Jan. 25 and is effective immediately.
On June 12, 2014, SBA published an interim final rule increasing all industry specific monetary based size standards (except for size standards for most agricultural enterprises that are set by statute) by 8.73% to reflect the inflation that occurred since the last adjustment for inflation in 2008.
The changes became effective July 14, 2014. These changes were in addition to the recent revisions as a result of the SBA’s comprehensive size standards review mandated by the Small Business Jobs Act of 2010.
SBA also adjusted its program specific monetary size standards with the exception of the new alternative size standard based on tangible net worth and net income that applies to SBA’s 7(a) and 504 loan programs.
The new alternative standard was established under the Jobs Act and will remain in effect until the SBA establishes a permanent alternative size standard for these programs.
The rule also clarified that the size standard exception for “Leasing of Building Space to Federal Government by Owners” under footnote 9 in SBA’s table of size standards applies to all industries in NAICS Industry Group 5311, Lessors of Real Estate.
The rule also deleted references to Surety Bond Guarantee size standards for contracts awarded in the presidentially declared disaster areas following Hurricanes Katrina, Rita, and Wilma in 2005.
It also deleted the determination date for eligibility under the agency’s Economic Injury Disaster Loan Program in connection with Hurricanes Katrina, Rita, and Wilma.
SBA estimates that more than 8,400 additional businesses will gain small business status under the adjusted size standards and become eligible for SBA’s financial and federal government procurement programs.
These changes can possibly lead to $150 million to $200 million in additional federal contracts and 80 additional loans, totaling about $30 million, to small businesses.
The size status of small businesses participating in federal procurement programs as either a prime contractor or subcontractor may have changed for some industries as a result of size standards changes published in the July 12, 2014, interim final rule.
To reflect the status under the revised size standards, small businesses should review the changes and re-certify their entity’s small business status within their entity’s System for Award Management registration.
A white paper titled, “Size Standards Methodology,” explains how the SBA establishes, reviews, or modifies its receipts-based and employee-based small business size standards.
For more information about SBA’s revisions to its small business size standards, refer to “What’s New with Size Standards.”