US SBA small business size standard overhaul

The U.S. Small Business Administration (SBA) has proposed a major overhaul of its small business size standards to modernize federal classifications. The initiative seeks to transition from complex 6-digit North American Industry Classification System (NAICS) codes to streamlined 4-digit category standards, which would reduce industry categories by approximately 65% to 338 broader classifications.

This proposal aims to expand the small business pool by an estimated 110,000 to 114,541 additional firms, increasing their access to capital, counseling, and federal contracting opportunities. The changes include raising limits for many industries and shifting qualification metrics from annual revenue to employee counts in several sectors. Under these proposed rules, a company could potentially earn over $1 billion annually and still qualify as a ‘small business’ if it meets specific employee-based thresholds.

While the initiative is intended to help rapidly growing companies maintain their status, critics have expressed concern that the expanded definitions could disadvantage genuine startups and micro-businesses by forcing them to compete with much larger entities. A public consultation period for the proposed rule is currently open.