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Size Standard Inflation Adjustment is Big News for Small Business

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Bill Jaffe
June 26, 2014
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Inflation can give an unfair perception that a business has outgrown its size standards. Luckily SBA recognizes and is addressing this.
© Marek - Fotolia.com
© Marek – Fotolia.com

As laid out in this detailed report in the Federal Register, SBA recently announced that they are adjusting the monetary-based industry size standards for inflation, as well as program-based size standards (except for SBA’s 7(a) and 504 loan programs). SBA is required to look at the impact of inflation on size standards every five years – though they are not required to make changes. Luckily for small businesses, this time they did.

SBA recognizes that many businesses have lost their eligibility for set-aside programs because of inflation, rather than having simply grown as a business. They wanted to give them an opportunity to regain that eligibility, as well as to help small businesses stay sheltered for longer.

SBA estimates that these adjustments will help 8,500 firms with receipts-based standards, and 170 firms with assets-based standards. The change will also give federal agencies access to more small businesses who can help them meet their requirements.

For receipts-based size standards, adjustments were made by multiplying their current levels by 1.0873 and then rounding up to the nearest $500,000. The same multiplication was applied to assets-based size standards (affecting five industries in the finance and insurance sector), whose new standard was rounded up to $550 million, an increase from $500 million. Program-based size standards were adjusted using the same calculation and method as the receipts-based standards.

These tables give the specifics:

Potential concerns in the report

Red tape: While the increase in eligibility could create a heavier administrative load for the SBA, they say they’re confident they have the systems in place to handle this. For small businesses themselves, SBA says there shouldn’t be any additional recordkeeping, though a reminder that you must be registered in the SAM database, and you must update your record annually, or sooner if your status has changed.

Competition: More eligible small businesses means more competition among them, though SBA says they predict this may be offset by more procurements being set aside for small businesses.

This is nothing but good news for small businesses, as the size standards will all grow by almost 10% across the board. For example, for my company TAPE, this creates an entire additional year in the NAICS codes governed by the old $25.5M (now $27.5M) size standard. That’s definitely a good thing.

 

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The All-Small Mentor-Protégé Program

SBA had a well-established mentor-protégé program (MPP) for SBA 8(a) certified firms but lacked an MPP program for other small business concerns and specifically, one for specialized certified concerns such as WOSB, EDWOSB, SDVOSB, & HubZone. The 2010 Jobs Act and 2013 NDAA gave SBA the authorization to address this by establishing an all-encompassing mentor-protégé program. Ms. Sandi Clifford, deputy director of the All Small Mentor-Protégé Program (ASMPP), visited the Mid-Tier Advocacy (MTA) earlier this year to discuss the program. Here are some of the highlights of this candid and informative discussion: As Ms. Clifford explained, mentor services to protégés include: • Management and technical assistance (internal business management systems) • Financial assistance (in the form of equity investments and/or loans) • Contracting assistance (contracting processes, capabilities acquisitions and performance) • International trade education (learn how to export, international trade business plan, finding markets) • Business development assistance (strategy, finding contracting and partnership opportunities) • General and/or administrative assistance (business processes and support) As administrators of the program, SBA provides: • Central HQ as opposed to 8(a) distributive model • Online application – certify.sba.gov • Online course tutorial requirement • Annual review and evaluation • Template agreements, i.e., MPA (Mentor-Protégé Agreement) Other All-Small Mentor-Protégé Program (ASMPP) details: • A protégé may generally only have one mentor at a time; SBA may approve a second (two is the maximum) where no competition exists, or if the protégé registers under a new NAICS or otherwise requires new mentor skills.  • Both protégé and mentor must be for-profit (with exception of protégé being an agriculture cooperative). • A mentor may have no more than three protégés at same time (no lifetime limit). • A participant can be both a protégé and mentor at the same time, if there is no competition or conflict. • The ASMPP is self-certifying and is open to businesses who qualify as small in their primary NAICS code, or who are seeking business development assistance in a secondary NAICs where they also qualify as small.  • SBA will not authorize MPAs in second NAICS in which firm has never performed any work; or where firm would only bring “small” status to Mentor and nothing else. • Existing 8(a) firms in last 6 months of the 8(a) program may transfer their MPA to the ASMPP via the online application process. Coordinate with 8(a) office to fine tune the process but there is no reapplication required. • Application requirements include upload of business plan, but no financial statements or tax returns. • JV agreements: ASMPP will not review and approve joint venture agreements. How to apply for the ASMPP: • Applicants are required to register in the System for Award Management (SAM) prior to submitting their mentor/protégé application. • Complete your business profile in certify.SBA.gov. • Evaluate and select your mentor prior to applying. This is not a matching program. SBA will not find a mentor for you. • Begin the ASMPP application process. • Protégés and mentors must complete the online tutorial and have their certificate of completion and all other required documents ready for upload Thank you to Sandi Clifford, Deputy Director, All Small Mentor-Protégé Program, for this helpful overview. TAPE has mentored several small businesses over it’s life as a large business (we’re large in some NAICS codes, though still small in others) and it has been gratifying, satisfying, and integral to our success. As protégés ourselves, we have benefitted from working with some really classy large businesses, and have also had the experience of being a protégé and really getting no tangible benefits. We are currently working with two small businesses, and negotiating ASMPP agreements. You can learn more about the ASMPP on the SBA site. To join MTA and attend future events like this one, please visit www.midtier.org.
Bill Jaffe
August 23, 2017
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