Small Business

SBA broadens rules for loans, contracts

By Michelle Swafford / Staff Writer

In increasing number of businesses may qualify for SBA loans and federal contracts designated for small firms.

The Small Business Administration announced Dec. 12 that it broadened its requirements on net worth, financial assets and receipts by about 8.7 percent to reflect inflation since 2002.

About 12,000 service, retail and construction businesses are affected by the change in size standards, said Gary Jackson, SBA assistant administrator for size standards.

That means the financial size standard for many small firms increased to $6.5 million from $6 million. The SBA takes the average revenue for three years to determine whether a firm meets the size standards.

Most small firms also cannot exceed 500 employees to qualify for SBA loans and small-firm designated contracts. There are a few industries that have higher or lower employee caps.

The increase in size standards for loans took effect Dec. 6 when the SBA's interim final rule was issued, but the standards for federal contracts don't take effect until Jan. 5.

"This particular action affects about 12,000 firms that had previously lost small status because of inflation," Jackson said.

He said some firms have not increased their business activity, but because of inflation, their revenue exceeds the SBA size standards.

The SBA also changed the process for measuring the size of small businesses for SBA business loans and economic injury disaster loans. The SBA now looks at whether firms' revenue primarily comes from their primary industry -- such as retail -- or their affiliate industry -- such as wholesale -- when determining which industry size standards to use.

The financials of the primary and affiliate industries are combined to look at where the majority of the revenue comes from, but the financials are not combined for meeting the size standards, Jackson said.

The change was made because some companies were precluded from SBA loans because of their affiliates, he said.

"It should only benefit companies," he said.

Business owners can check the size requirements for their industries at www.sba.gov/size and then click on "table."

The SBA continues to review its size standards and is considering reducing the number of industry size standards. Last summer it held 11 public hearings and received more than 6,000 written comments about ways to simplify the federal agency's size standards.

Information and ideas are being reviewed, but "it's too early to indicate what those changes may consist of," Jackson said.

Michelle Swafford covers health care and small business for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached by e-mail at swafford@lasvegassun.com or at (702) 259-2326.

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