Is your business still “small”? That answer may be about to change on paper, even if your revenue and headcount haven’t. The SBA’s proposed size standards overhaul would consolidate nearly 1,000 industry standards into 338 and bring about 114,541 more businesses under the small business umbrella. The SBA wants to replace nearly 1,000 size standards with 338 and newly classify about 114,541 businesses as small.
If you use SBA loans or bid on federal contracts, the SBA’s size standards decide whether you count as a small business. In August, the agency proposed the biggest restructuring of those standards in decades.
What are size standards?
Every industry has a size standard, a cap on average annual receipts or number of employees that determines whether a business counts as “small” under SBA rules. Cross the line and you may lose eligibility for SBA-backed financing and for contracts the government reserves for small businesses.
What is the SBA proposing?
On August 20, the SBA published two linked proposed rules: one revises the methodology for setting size standards, and the other applies it. The main changes:
- Fewer standards: Roughly 1,000 industry-specific standards would be consolidated into 338, with 276 at the four-digit NAICS level and 62 at the five-digit level.
- Simpler formula: A three-factor approach would replace the seven-factor method.
- New measures: Some industries would shift from receipts-based to employee-based limits.
- Higher thresholds: Standards generally rise, so more firms qualify.
Consolidating the standards is expected to simplify the system and cut down on NAICS code confusion and size protests.
Who could be affected?
About 114,541 businesses would newly qualify as small, including roughly 37,000 firms that held federal contracts worth about $71 billion in fiscal 2025. Thresholds in professional services, IT and engineering could rise as much as tenfold or more.
Government contractors and subcontractors, businesses planning to apply for SBA loans, and firms in professional services, IT and engineering should pay the closest attention.
Why it matters
Size standards decide eligibility for SBA loans and federal contract set-asides, so a change in the rules can change your options.
- If you newly qualify: You may gain access to SBA financing and set-aside contracts that were out of reach.
- If you already qualify: Expect more competition for set-asides as larger firms now count as small.
- If your industry moves to employee-based limits: Your eligibility could hinge on headcount instead of revenue.
- If you team with others: Teaming arrangements, subcontracting and acquisitions could look different.
What to do now
- Find your NAICS code and compare your current size standard with the proposed one.
- Review your numbers: Gather your average annual receipts and employee count so you can see where you fall.
- Talk to your advisor about how the change could affect your certifications, bids and loan plans.
- Watch for the final rule. This is still a proposal, and the final version may look different.
The SBA also hosted a virtual public forum on September 17 to gather input. Even if you miss today’s deadline, the rule-making isn’t over. Use this time to learn where your business stands, so you’re ready when the final rule lands, and to plan for a market that may have more small-business competitors.
As a business broker, I see every day how much rules like this shape what’s possible for buyers and sellers! A change in who qualifies as “small” can widen the pool of buyers who are eligible for SBA financing, and that can open new doors for owners thinking about an exit. Now is a smart time to understand where your business stands and what it could be worth in a shifting market.
If you’re considering buying, selling, or simply want to know what your business could be worth, I’d love to talk. Reach out, let’s chat and map out your next move!
