June 28, 2022
SBA Hot Topic Tuesday – New SBA Rule Increases Small Business Eligibility
The SBA issued a final rule adopting changes to small business size standards calculations and will become effective on July 6, 2022.
The period for calculating employee-based size standards doubled from 12 months to a 24-month trailing average basis. This ruling will apply to all the SBA programs and any industries that are subject to SBA’s employee-based size standards. There will not be a transition period that allows small businesses to choose to calculate using the 12-month or 24-month period. Once effective, businesses must use the 24-month period. The ruling is expected to lower the employee average compared to a 12-month average, therefore increasing the number of recipients that are eligible for the different SBA programs.
The SBA anticipates that this change will allow businesses “to better adjust to surges in employment in both the short and medium-term”.
An additional change that the rule will bring affects the size calculations for businesses participating in SBA’s Business Loan, Disaster Loan, Surety Bond, and Small Business Investment Company (SBIC) Programs. Participants will have the ability to choose between a three-year or a five-year averaging period to calculate their average annual receipts. More businesses should be eligible for and have the opportunity to benefit from SBA programs.
“These changes will allow larger small businesses to retain their small business size status for longer, and some mid-sized businesses to regain their small business status,” writes the SBA in the final ruling document. “SBA believes that expanding the reach of its programs to include a greater number of small businesses supports all small businesses and the overall economy as the Nation continues to recover from the economic challenges caused by the COVID19 pandemic and small businesses remain in need of SBA assistance.”