July 23, 2019

SBA to Adjust Small Business Size Standards for Inflation

David Dixon, Richard Oliver, Robert Starling

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Pillsbury Winthrop Shaw Pittman LLP

The interim rule increases all small business revenue-based size standards, allowing many businesses to regain small business status or to remain a small business for longer.

TAKEAWAYS

SBA is increasing the revenue-based size standards to account for inflation.
This will allow many advanced small businesses to remain small longer and may allow other businesses that recently lost their small business status to qualify again as small.

The interim rule will go into effect on August 19, 2019, prior to the close of the comment period on September 16, 2019.

On July 18, 2019, the U.S. Small Business Administration (SBA) issued an interim final rule adjusting the revenue-based size standards for small business to account for inflation. The rule affects all small businesses, and will take effect on August 19, 2019.

SBA raised the amounts for receipts-based size standards ranging from $0.75 million to $38.5 million, and one assets-based size standard of $550 million. The size standard adjustments were made by increasing the dollar amounts by 8.37 percent, which is based on the inflation increase over the last five years. After adjusting for inflation, the results were then rounded to the nearest $500,000. The results are as follows:

These adjustments will have significant impacts on all small businesses. Many larger small businesses that have recently outgrown their applicable size standard may now qualify again as small businesses. Also, many small businesses can remain small businesses for longer. Considering SBA’s upcoming implementation of the Runway Act, which will change the measurement period for revenue-based size standards from three to five years (discussed here), many small businesses may need to revise their strategic planning.

Comments on the rule must be submitted to the SBA by September 16, 2019, but, because this is an interim rule, it will take effect on August 19, 2019, before the end of the public comment period. Thus, proposals submitted on or after August 19, 2019, will be governed by these new size standards.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.