Hoping to allow for greater Small Business Program eligibility, the Small Business Administration (SBA) recently released a new definition of “small business” for several sectors. In the works since 2007, this labeling overhaul – some 37 changes to size definitions were made – is the first in 25 years. The SBA published its final rule on the size definitions of small businesses in Professional, Scientific, Technical and Other Services sectors in The Federal Register on February 10.
These recently-released size standard updates will take effect on March 12 of this year. The SBA’s measurement of size stems in part from total receipts and number of employees; receipts are calculated by total income plus the cost of goods sold. Higher revenue limits means, in short, that there are a lot more businesses that, now labeled “small,” will be eligible to receive the federal assistance and contracting opportunities that are earmarked for these types of companies. The SBA estimates 8,350 more businesses will now fall under federal small business standards. With a larger pool of businesses to choose from, officers granting contracting opportunities will benefit also, the SBA furthers.
Referring to it as one of the most significant pieces of small-business-based-legislature in over ten years, the Small Business Jobs Act of 2010 further prompted the SBA to make changes to size-based small business classifications. Whilst recent changes have been published as the SBA’s current final rule, the Act also dictates an ongoing assessment of size standards for several years to come.
37 of the revenue-based size standards in 34 industries and three sub-industries in the Professional, Scientific, Technical and Other Services sectors were affected by these size-based labeling changes. Current economic conditions, inflation, federal contracting trends, average firm size and competition amongst specific industries were all considered by the SBA in regards to these changes. Many businesses of larger sizes in these industries will benefit, as they are now going to be referred to as small businesses, and will fall under the jurisdiction of the SBA’s financial and contractual negotiating.
These changes are being viewed carefully by the National Small Business Association (NSBA), a membership-based organization for businesses with less than 500 employees. Its spokeswoman, Molly Brogan, said that the SBA’s changes in small business classification are concerning because they link industries with potentially little in common, such as architecture and engineering.
The bi-partisan-backed Protect American Small Businesses Act, helmed byU.S.Representatives Joe Walsh (R-IL) and Gerry Connolly (D-VA), is also addressing the size standards of small businesses in this country. Unhappy with the SBA’s re-classifications, Walsh and Connolly’s bill seeks to use the North American Industry Classification System (NAICS) code to redefine the size standards of small businesses in individual sectors. Businesses of differing sizes have differing needs, further Walsh and Connolly, and incentives for small businesses should be more-closely-tied to the size, worth/income and level of growth a business has encountered. In essence, they feel that there is a reason we have the term “small business” in this country, and protecting the individual needs of an entity operating at a much different scale than a multi-national or global company is paramount.
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Tags: economic stimulus, economy, job creation, SBA
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