In the U.S., the definition of the term “small business” is maintained by the Small Business Administration (SBA). The size standards differ from industry-to-industry and can be based on revenue or employees. As these standards change from time to time and industry by industry, if you are a fast-growing company, you’ll likely have the SBA’s Size Standards webpage bookmarked.

A new “interim final rule” issued recently by the SBA goes into effect today, meaning that some larger companies will still be considered a small business. Being classified as a small business is  a good thing for these companies as it enables the business to qualify for participation in certain government procurement and loan programs. Rather than being an insult to be called a “small business,” the label governs statutory definitions that are included in hundreds of federal and state laws designed to benefit small businesses.

Indeed, if you participate in federal government procurement programs as a prime contractor or as a subcontractor (and you’ll know if you do, as it takes a lot of effort and time to qualify), if you haven’t done so already, you must visit the System for Award Management (SAM) website and verify that your profile and certifications are up to date based on these revised size standards

Does size matter?

Here is how the SBA describes what size standards are and why they are important:

“(The) SBA has established numerical definitions of small businesses, or “size standards,” for all for-profit industries. Size standards represent the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business concern. In determining what constitutes a small business, the definition will vary to reflect industry differences. These size standards are used to determine eligibility for SBA’s financial assistance and to its other programs, as well as to Federal government procurement programs designed to help small businesses. Also, the Small Business Act states that unless specifically authorized by statute, no other Federal department or agency may prescribe a size standard for categorizing a business concern as a small business concern, unless such proposed size standard meets certain criteria and is approved by the Administrator of SBA.”

What do today’s changes mean for most small businesses?

Nothing. The changes will only have impact on a small number of the largest businesses that are classified as small. The vast majority of businesses in the U.S. are sole proprietorships, or, as they are described by some agencies, “no-employee businesses.”

What are the changes?

    • The new standards adjust monetary-based industry size standards (i.e., receipts, assets, net worth, and net income) for inflation that has occurred since the last adjustment in 2008.
    • Adjusts size standards for certain SBA loan programs.
    • Makes some technical changes in regulations related to timeframes of certain natural disaster-related programs.

How to keep up with future size standard changes

Book mark this page on the SBA’s website.

(Photo: ThinkStock)

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