When it comes to business, size matters.
While the Small Business Act of 1953 was intended to prevent monopolies and provide small businesses with financial assistance and government contracting opportunities, one question remained: “How big can a company become before it no longer qualifies as a ‘small business’?”
Today, the Small Business Administration (SBA) employs two types of size standards to determine if your business meets the criteria and is eligible for government-guaranteed funding:
- Industry-Specific Size Standards – Covering 1,037 industrial classifications, these standards are based on factors including number of employees, average annual receipts, average asset size, or a combination of number of employees and barrel per day refining capacity.
- Alternative Size Standards – Based on the applicant’s maximum tangible net worth and average net income after federal taxes.
A new rule that went into effect on March 18, 2024 will increase SBA’s Alternative Size Standards to adjust for inflation. The change will expand access to financial assistance and other resources for small businesses.
- The inflation adjustment increases the size standards to $20 million (up from $15 million) for tangible net worth and $6.5 million for average net income (up from $5 million).
- The Federal contract limit is increased to $9 million and can be increased to $14 million if a federal contracting officer certifies that such a guarantee is necessary.
This change represents a 34.46% adjustment for inflation that has occurred since the establishment of the alternative size standard in 2010.
The rule revision will apply to 8.1 million employer firms that will gain eligibility from the expanded requirements. Experts anticipate more than 500 new SBA loans will be produced in 2024 thanks to the newly adjusted alternative size standards.
The increased SBA eligibility follows another successful year of lending for the U.S. Small Business Administration. In November, the SBA reported that in fiscal year 2023 it had “delivered $52.3 billion in capital, disaster relief, and bonding in small businesses…across America.”