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SBA plan to fold 1,000 size standards into 338 would let 114,000 larger firms count as small
SBA's proposal to collapse about 1,000 size standards into 338 would let an estimated 114,000 larger companies qualify as small businesses. Lenders back it for the loan volume, while small firms and 12 Senate Democrats object to larger rivals for set-aside contracts.
The Investor · Invest desk
What happened
- The SBA proposes consolidating about 1,000 industry-specific size standards into 338 broader ones that set eligibility for its loans and for federal small-business contracts.
- Lenders and their trade groups mostly favor the plan, while most of the small businesses that have commented oppose it.
- After receiving more than 3,000 written submissions, the SBA extended its comment period by 60 days.
- Twelve Senate Democrats, including ranking member Edward Markey, asked SBA Administrator Kelly Loeffler to rescind the plan.
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Why it matters
- exposure Small contractors carry the downside: set-aside competitions they enter now would open to companies that, by the senators' account, can exceed $1 billion in annual revenue.
- capability Credit unions would get a larger pool of eligible SBA borrowers, the condition America's Credit Unions says could bring more of its members into SBA lending.
- constraint No final rule can come before comments close Nov. 20, about two months out, so lenders and contractors keep working under the existing 1,000 standards until at least then.
The two camps in the comment file are mostly arguing about different programs. America's Credit Unions, the largest credit-union trade group, built its Sept. 21 support letter around lending [6]. "America's Credit Unions has long encouraged SBA to identify ways to expand participation in its lending programs," Tyler Maron, the group's regulatory advocacy counsel, wrote [7]. The opposition writes about contracts. Elizabeth Milito, executive director of NFIB's Small Business Legal Center, wrote that firms of very different sizes "may be considered 'small' under SBA standards" but that "their resources and ability to compete for federal opportunities vary significantly" [10].
One definition gates both programs, and the two treat a new entrant in opposite ways. To a lender, each of the estimated 114,000 companies that would newly count as small is a possible borrower [2]. To a firm already bidding on set-aside work, each is a possible competitor, or more precisely a larger one [2]. Milito put the gap in headcount: "The average NFIB member owns a small business with about eight employees and operates without dedicated departments for legal compliance and regulatory affairs," she wrote, setting those members against businesses "with hundreds or even thousands of employees" [10]. Patricia Hussey, founder of the Washington consulting firm Georgetown Policy Partners, wrote on Sept. 22 that the rule "risks preserving the label of small-business protection while weakening its practical value for the businesses that need that pathway most" [13].
Folding about 1,000 classifications into 338 puts roughly three old standards behind each new one [14]. It cuts about 662 of them, around two-thirds of the list [15]. The merged standards are broader and let more sizable concerns qualify [1]. The published account of the proposal does not include the new revenue or employee thresholds, or which industries the 114,000 firms come from.
Support among lenders is uneven. A banker at the $28.5 billion-asset Ameris Bancorp in Atlanta wrote in an unsigned letter: "Everything costs significantly more nowadays, therefore increasing the size standards of small businesses makes perfect sense" [8]. The Independent Community Bankers of America "has not taken a position on the SBA proposal at this juncture," a spokesperson said Thursday [9].
The rule can go three ways from here. The SBA can finalize the 338 standards as proposed, narrow them once comments close, or withdraw the plan, as the 12 senators asked Administrator Kelly Loeffler to do [11]. I think the lending half is the easier one for the agency to grant. A loan to a newly eligible company is added volume for the lender. A set-aside contract won by one of those companies is a contract some smaller bidder did not win.
The counter-case is that most of the 114,000 never bid on federal work, so the contracting harm is smaller than the letters suggest [2]. An SBA breakdown showing the newly eligible firms clustered in industries with little set-aside spending would show the opposition's fear is overstated.
What to watch
- Whether the final rule applies the 338 standards to both SBA loans and federal contracts, or sets separate thresholds for contracting.
- Whether the Independent Community Bankers of America takes a position before comments close.
- How many letters arrive by Nov. 20 compared with the more than 3,000 filed in the first window.