The U.S. Small Business Administration decides which businesses count as small. That label decides who can compete for contracts set aside for small businesses, who can get an SBA-backed loan, and who gets lighter treatment under some federal regulations [1].
On August 20, 2026, SBA proposed new size limits across the economy and a new method for setting them [1, 2]. The public can comment until November 20, 2026 [3]. This is a summary of what would change and what I think SBA still needs to explain. My full comments, as filed, are linked below for anyone who wants the detail.
How it works today
Every business falls under an industry code, called a NAICS code, and SBA sets a size limit for each one. Some limits are based on a firm’s average annual revenue and some on its number of employees. Today there are limits for 978 industries, plus 18 exceptions for narrow kinds of work, like dredging and fighting forest fires, that don’t fit the rest of their industry [1].
What would change
SBA would replace the 978 limits with 338 broader ones and drop all 18 exceptions [1]. Most limits would go up, and some would go up a lot. Engineering services would go from $25.5 million in average annual revenue to $252 million. Computer systems design would go from $34 million to $531 million. Semiconductor manufacturing would go from 1,250 employees to 2,800 [1].
Many industries would also switch from counting revenue to counting employees. A commercial building contractor is small today up to $45 million in revenue. Under the proposal it would be small up to 600 employees, whatever its revenue [1]. In all, 64 of the 338 new limits would switch from revenue to employees [2].
SBA also proposes not to lower any limit for industries that keep the same measure, whether that’s revenue or employees. In 45 industries, its own analysis pointed to a lower limit, and SBA proposes to keep the current one instead [1].
Why SBA wants this
SBA says it wants to stop pushing growing firms out of small business programs too early [4]. Counting employees is meant to keep firms from moving in and out of small status as their revenue goes up and down [1]. Broader categories are meant to end close calls between similar codes. SBA’s example is shipbuilding, with a limit of 1,300 employees today, and boat building, with 1,000 [1]. Those are reasonable goals, and parts of the proposal fix problems I saw in my own work.
How many businesses it affects
SBA estimates that about 114,541 more businesses would count as small. About 37,002 of them already hold federal contracts, worth more than $71 billion in fiscal year 2025 [1]. SBA’s Office of Advocacy, which speaks independently within SBA, has put the number of current contractors who would gain small status at 4,000 to 6,000 [5]. As of October 20, I haven’t found anything in the record that explains the difference.
SBA also estimates that almost no business that is small today would lose that status [1].
What it means for today’s small businesses
The main change for an existing small business is who it competes against. As one practitioner put it, a small firm may soon be bidding against companies “several times larger, with deeper past performance and far more sophisticated proposal shops” [6]. SBA acknowledges that more competition could cut into current small firms’ profits and their chances of winning contracts [1].
There is research on what happened after earlier increases. A 2024 working paper by four economists used Census Bureau data to study size limit increases from 2005 to 2017. It found that afterward the smallest firms in an industry lost revenue and were less likely to survive, and it linked that to contracts moving from smaller firms to larger ones [7]. That’s a study of past changes, not a prediction about this one. The proposal doesn’t mention it.
Agencies could also count contracts won by newly small firms toward their small business goals, even contracts that weren’t set aside [1]. Reported small business numbers could go up without any change in who actually wins the work.
With no revenue cap, a firm in an industry that counts employees could have very high revenue and still be small. SBA saw this problem in 2004, the last time it proposed a broad move to employee counts, and proposed a revenue cap for some industries then [2]. This proposal has none [1].
Checking who qualifies
This is the part closest to my own experience. I reviewed Paycheck Protection Program (PPP) loan files after the money had gone out, and I saw how much harder it is to sort out eligibility after the fact than before.
Size is mostly self-reported. In federal contracting, a firm’s size usually gets a closer look only when someone challenges it through a size protest [10]. SBA itself describes much of the revenue and employee data in the government’s contractor registration system as “outdated or inaccurate” [1]. Employee counts are also harder to check than revenue, which can be tied to tax returns. SBA’s rules count part-time, temporary, and leased workers and average them over the past 24 months [11]. That number doesn’t appear on any one document a lender or contracting officer would normally see.
The same table also decides who qualifies for SBA loans. For 7(a) and 504 loans there’s an alternative test based on net worth and net income [12]. SBA said it couldn’t make a meaningful estimate of the effect on disaster loans [1].
This also matters for emergency programs. Eligibility for the first round of PPP loans was tied in part to this same table [13, 14]. If Congress builds a future emergency program the same way, it would pick up these higher limits unless someone sets separate ones. In PPP, the money went out fast, and much of the checking happened after it was gone.
The U.S. Chamber of Commerce has asked SBA to set separate size standards for federal contracting and for lending and SBA’s other programs, and to ask Congress for that authority if SBA believes it doesn’t have it [15]. My comments don’t take a position on that. It does point to the same problem I see. One table decides who qualifies for programs that check size in very different ways.
The legal question
The Small Business Act says size limits have to vary from industry to industry as much as needed to reflect their differences. It also says SBA can set one limit for a group of industries only if it shows that limit is right for each industry in the group [8]. SBA’s test for grouping industries looks at how they’re classified, not at data about the industries themselves [2]. In 2024, SBA said its own data didn’t support one limit across computer systems design and related services [9]. The proposal now sets one limit of $531 million for that whole group [1].
Whether SBA’s groupings meet the law depends on the record behind each grouped standard. My concern is that the proposal doesn’t yet show that analysis. In the final rule, SBA should explain how each grouping meets the requirement that a shared size standard be appropriate for every industry it covers.
What I’ve asked SBA to do
My comments ask SBA to put the data behind its tables in the public record and to explain why its contractor estimate differs so much from Advocacy’s. They ask SBA to respond to the research on past increases and to explain how its groupings meet the law. They also ask how it will check size before awarding contracts and approving loans, and they point out a few errors in the proposed tables.
My comments to SBA
Comment on Docket SBA-2026-0199 (Proposed Rule)
Filed October 20, 2026.
Regulations.gov tracking number: mvh-2yp5-9wbc
Read the Full Comment (PDF)
Comment on Docket SBA-2026-0265 (Methodology)
Filed October 20, 2026.
Regulations.gov tracking number: mvh-3212-dz6v
Read the Full Comment (PDF)
How to comment
Anyone can comment through November 20, 2026, at regulations.gov. Use docket SBA-2026-0199 for the size limits and SBA-2026-0265 for the method behind them [3]. A comment that names a specific industry code and shows what the new limit would do to a real kind of business gives SBA something concrete to answer.
This is an independent analysis based on publicly available information and professional experience. The views expressed are my own.
Traci Harig is a former GS-13 loan specialist at the U.S. Small Business Administration, where her work on 7(a)/PPP covered eligibility and forgiveness reviews, affiliation analysis under 13 CFR §121, appeals, and case reviews and analysis on matters referred by OGC, DOJ, and OIG, including False Claims Act matters. She writes about program design, eligibility verification, and federal program integrity.
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Sources
[1] U.S. Small Business Administration, “Small Business Size Standards,” proposed rule, 91 Fed. Reg. 53741 (Aug. 20, 2026), RIN 3245-AI67, Docket No. SBA-2026-0199. https://www.federalregister.gov/documents/2026/08/20/2026-17042/small-business-size-standards
[2] U.S. Small Business Administration, “Small Business Size Standards: Revised Size Standards Methodology,” notice of availability, 91 Fed. Reg. 54096 (Aug. 20, 2026), Docket No. SBA-2026-0265. https://www.federalregister.gov/documents/2026/08/20/2026-17039/small-business-size-standards-revised-size-standards-methodology
[3] U.S. Small Business Administration, “Small Business Size Standards,” extension of comment period, 91 Fed. Reg. 60524 (Sept. 24, 2026), Dockets SBA-2026-0199 and SBA-2026-0265. https://www.federalregister.gov/documents/2026/09/24/2026-19546/small-business-size-standards
[4] U.S. Small Business Administration, “SBA Proposes Overhaul to Simplify Small Business Classification and Expand Access to Federal Programs,” press release, Aug. 20, 2026. https://legacy.sba.gov/article/2026/08/20/sba-proposes-overhaul-simplify-small-business-classification-expand-access-federal-programs
[5] U.S. Small Business Administration, Office of Advocacy, “Advocacy Supports SBA Size Standards Update,” Press Release SBA No. 26-20 ADV, Sept. 17, 2026. https://advocacy.sba.gov/2026/09/17/advocacy-supports-sba-size-standards-update/
[6] Ray Jones, “SBA’s size standards overhaul means bigger thresholds, fewer exceptions, real winners and real losers,” Washington Technology, Sept. 15, 2026. https://www.washingtontechnology.com/opinion/2026/09/sbas-size-standards-overhaul-means-bigger-thresholds-fewer-exceptions-real-winners-and-real-losers/415998/
[7] J. David Brown, Matthew Denes, Ran Duchin, and John Hackney, “How Big is Small? The Economic Effects of Access to Small Business Subsidies,” Working Paper CES-24-28, U.S. Census Bureau Center for Economic Studies (June 2024). CES working papers are not official Census Bureau positions. https://www.census.gov/library/working-papers/2024/adrm/CES-WP-24-28.html A revised version: “How Big is Small? The Economic Effects of Access to Small Business Government Support,” NBER Working Paper 35703 (Sept. 2026). https://www.nber.org/papers/w35703
[8] 15 U.S.C. § 632(a)(3) and (a)(7). https://www.law.cornell.edu/uscode/text/15/632
[9] U.S. Small Business Administration, “Small Business Size Standards: Revised Size Standards Methodology,” 89 Fed. Reg. 74109 (Sept. 12, 2024), FR Doc. 2024-20228, at 74117. https://www.federalregister.gov/documents/2024/09/12/2024-20228/small-business-size-standards-revised-size-standards-methodology
[10] FAR 19.302, Protesting a small business representation or rerepresentation, 48 CFR 19.302. https://www.ecfr.gov/current/title-48/chapter-1/subchapter-D/part-19/subpart-19.3/section-19.302
[11] 13 CFR 121.106. https://www.ecfr.gov/current/title-13/part-121/section-121.106
[12] 13 CFR 121.301. https://www.ecfr.gov/current/title-13/part-121/section-121.301
[13] 15 U.S.C. § 636(a)(36)(D). https://www.law.cornell.edu/uscode/text/15/636
[14] U.S. Small Business Administration and Department of the Treasury, “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended by Economic Aid Act,” interim final rule, 86 Fed. Reg. 3692, 3695 (Jan. 14, 2021). https://www.federalregister.gov/citation/86-FR-3692
[15] U.S. Chamber of Commerce, comment letter, Sept. 21, 2026, Docket No. SBA-2026-0199 (SBA-2026-0199-2388; also filed as SBA-2026-0265-0743). https://www.regulations.gov/comment/SBA-2026-0199-2388
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