SBA revises small business size standards

The federal government has -- in some cases, drastically -- revised standards that determine which businesses are small enough to receive Small Business Administration aid.

The rule changes affect 70 industries and go into effect July 22, when more than 17,000 firms not eligible for SBA benefits will begin to qualify, the SBA said Thursday.

For 25 industries, including consumer lending and sports team, among others, the average annual revenue size standard was increased to $35.5 million from $7 million.

There are two key benefits to qualifying as a small business, says Khem Sharma, chief of the SBA's division of size and standards.

Businesses become eligible for SBA-guaranteed loans and, more importantly, they are added to the agency's database of firms eligible for government contracts.

Federal agencies are supposed to give at least 23% of government-awarded contracts to small businesses, the Sharma said. Being included in the database makes it easier for agencies to locate small businesses, especially when they are searching for potential contractors based on specific criteria.

For example, says SBA spokeswoman Tiffani Clements, "If you're looking for woman-owned businesses in different industries, you can do a search for those particular businesses."

Being in the database puts small businesses on a more level playing field with much-larger rivals. However, there are advantages and disadvantages to the revised standards, Sharma says. Some small businesses will have more room to grow without fear of losing government contract eligibility.

The downside is that some smaller companies might lose out on contracts to the new "larger small businesses," Sharma said.

The SBA plans to keep a close watch on the awarding of federal contracts to determine whether adding more companies to the database is beneficial. If the SBA concludes it's harmful, it will affect the next round of revisions to size standards, Sharma says.

Typically, the SBA reviews size standards about every five years, in part to adjust for the impact of inflation on a company's annual revenue and other metrics. This round of adjustments was based on market shifts, including the average size of companies, within 70 industries.

More rule changes are coming the next few years as part of the implementation of the 2010 Small Business Jobs Act, the SBA said.

Links to the latest rule changes:!documentDetail;D=SBA-2012-0013-0017!documentDetail;D=SBA-2012-0015-0011!documentDetail;D=SBA-2012-0006-0004!documentDetail;D=SBA-2012-0020-0004


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