SBA Proposal Could Add 114,541 Eligible Small Businesses

The Small Business Administration has proposed a broad overhaul of the rules used to determine which firms qualify as “small” for federal programs. The agency estimates the changes could increase the number of eligible small employer firms by 114,541.

The proposal was published in the Federal Register on August 20, 2026, under RIN 3245-AI67 and Docket No. SBA-2026-0199. It is a proposed rule, not a final regulation, so current size standards remain in effect while the agency takes public comments.

What the SBA would change

The proposal covers 338 industry groups and industries. The current system has 978 size standards based largely on six-digit North American Industry Classification System categories and includes 18 subindustry exceptions.

Under the proposal, SBA would use 276 four-digit and 62 five-digit NAICS standards, remove the exceptions and place receipt-based and employee-based standards in one rule. The agency says the change is intended to make it easier for owners and federal contracting officials to determine which standard applies.

Some industries would shift from average annual receipts to employee counts. SBA also proposes adjusting monetary thresholds for inflation and productivity growth. Its revised methodology would consider national industry size, the number of geographic markets in which firms compete and net imports when estimating average market size.

How many firms could be affected

SBA estimates that the number of eligible small employer firms would rise from 6,344,967 to 6,459,508. That is a net increase of 114,541 firms, or about 1.8% of the employer-firm pool. It should not be confused with broader estimates that count roughly 36 million small businesses using a different definition.

The agency says fewer than 200 firms could lose small-business status under the proposed methodology. SBA also proposes not reducing standards that retain the same measure. After that policy choice, the agency estimates that fewer than five firms in Direct Property and Casualty Insurance Carriers could lose status because of a switch from an employee-based standard to a receipts-based standard.

These are SBA projections, not a guarantee that a particular business will qualify or retain its status. The result for an individual firm would depend on its NAICS classification, ownership and affiliation rules, and whether the applicable standard uses employees, receipts or another measure.

Why the classification matters

Small-business status is used in programs involving SBA-backed financing, federal contracting and regulatory flexibilities. A higher or revised threshold could allow some growing firms to remain eligible for those programs longer.

The proposal could have a notable effect on federal contracting. SBA estimates that 37,002 firms with federal contracts in fiscal year 2025 could become newly eligible as small businesses. Those firms held more than 105,655 contracts worth more than $71 billion, according to the agency’s analysis.

Newly eligible firms could compete for contracts restricted to small businesses, and agencies could count eligible awards toward their small-business contracting goals. But more eligible competitors could also make some set-aside contracts harder to win, particularly for growing firms that already compete near the current thresholds.

The proposal would change one eligibility test; it would not automatically provide a loan, contract or certification. Individual programs can have additional requirements involving ownership, control, socioeconomic status, registration, location or industry-specific eligibility.

For federal contracting, businesses may still need to register in the System for Award Management and complete required representations or certifications. SBA says businesses participating in procurement and some other programs must self-certify their small-business status at least annually.

What owners should do now

Businesses close to an existing SBA size limit can compare their current NAICS classification and standard with the proposed tables. They should not change contracting representations or other official certifications based only on the proposal.

The SBA is accepting comments through September 21, 2026. Businesses and trade groups can submit comments through Regulations.gov or by mail to the agency, identifying RIN 3245-AI67 or Docket No. SBA-2026-0199.

Until SBA issues a final rule and implementation instructions, the current Table of Size Standards remains the practical starting point for checking eligibility.

If finalized, the proposal could let more growing firms access federal programs, but it could also broaden the competition for contracts and other benefits. The next major steps are the September 21 comment deadline, SBA’s review of the record and any final rule explaining which changes will take effect and when.

Sources

Look for updates to this story

Discover more from Interactive News

Subscribe to get the latest posts sent to your email.