Size Standard Inflation Adjustment is Big News for Small Business

© 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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