Keeping Small Businesses "Small" for Longer Periods

There are many Government programs that accrue benefits to small businesses. One of the best, for small businesses at least, are the Federal Government's small business contracting and subcontracting goals and the contracts that are "set aside" for small businesses to help the Government achieve those goals. SBA loans are also at the top of the list of Government benefits for small businesses. SBA loans offer working capital at reasonable rates - sometimes to small businesses who might not otherwise qualify for loans.

Small businesses are determined by their size, either headcount or revenue. Those standards vary widely depending upon industry. for example, the SBA size standards for food service contractors, accounting offices, and roofing contractors are $41.5 million, $22 million, and 16.5 million respectively. Manufacturing and Wholesaling businesses tend to be stated in terms of number of employees while Construction, professional, scientific, and technical service industries tend to be stated in sales dollars.

The problem with these rigid measurements is that a company that wins one or two major contracts might suddenly be removed from SBA benefits because they "size out". Sometimes however, those peaks are only temporary and when the contract(s) end, the companies revert to their normal sizes.

Last month, two Congressmen (a Democrat and a Republican) introduced legislation designed to mitigate the effects of sudden growth, protecting small businesses from being prematurely forced out of the small business category. The bill would grant small businesses additional time to transition before competing in the open market. According to the press release accompanying this bill,

SBA's (Small Business Administration) programs are designed to support small businesses that fall below certain size standards. Once those thresholds are exceeded, businesses face new challenges such as no longer being eligible to qualify for SBA loans, contracts and other assistance, and having to compete in the open market against much larger businesses. Sudden growth in the form of receiving one or two sizable contracts results in spikes in employee count, which in turn may place a small business prematurely out of the size standard and limits their time to grow.

This new bill, entitled "Caputring All Small Business Act of 2019" provides a solution to this problem. It does so by lengthening the calculation period used to determine average employee count from the preceding 12 months to 24 months.