Could The SBA Be Redefining Small Business In 2026
The SBA Is Redefining “Small Business.” Could Your Company Qualify Under the Proposed New Rules?
More than 110,000 additional companies could potentially be classified as small businesses under a sweeping SBA proposal—and the agency is hearing public testimony on the changes tomorrow.
What exactly makes a business “small”?
Ten employees? Fifty? Less than $1 million in annual revenue?
The answer is more complicated than most business owners realize.
For purposes of many federal programs, the U.S. Small Business Administration doesn’t use one universal definition of a small business. Instead, SBA size standards vary by industry and are generally based on either a company’s average annual receipts or number of employees.
And now those rules could be changing.
On August 20, 2026, the SBA proposed a major overhaul of the system used to determine which companies qualify as small businesses. The proposal would simplify industry classifications and increase size thresholds in numerous industries.
According to the SBA, the changes could bring more than 110,000 additional employer firms into the small-business category.
And this isn’t an old regulatory proposal gathering dust in Washington.
Tomorrow, September 17, the SBA will hold a virtual public forum to hear testimony about the proposed changes. Testimony from the forum will become part of the official administrative record that SBA says it will consider when developing the final rule.
For growing companies that have assumed they’re simply “too big” to qualify as small businesses, this may be a development worth watching closely.
🔎 At a Glance
What’s happening?
The SBA has proposed a significant overhaul of its small-business size standards.
Are the new standards in effect?
No. These remain proposed rules as of September 2026.
How many companies could be affected?
SBA estimates that more than 110,000 additional employer firms could be classified as small businesses under the proposal.
What’s changing?
The proposal would simplify industry classifications, raise numerous size thresholds and change the methodology SBA uses to evaluate industry market size and competition.
Why does it matter?
A company that is too large under today’s standard could potentially qualify as small under a revised standard if the proposal becomes final.
What’s happening next?
SBA is holding a virtual public forum on September 17, 2026, to gather testimony before developing the final rule.
What Does the SBA Actually Mean by a “Small Business”?
This is where things get interesting.
There isn’t one revenue or employee number that separates every small business from every large business.
SBA size standards vary by industry and are generally based on either the number of employees a company has or its average annual receipts.
The applicable standard is tied to the company’s North American Industry Classification System (NAICS) code.
That means a company employing several hundred people might still qualify as small in one industry, while a company with much lower revenue could exceed the small-business threshold in another.
For federal contracting purposes, SBA generally averages annual receipts over the company’s latest five completed fiscal years.
Employee-based standards generally look at the average number of employees during each pay period over the company’s latest 24 calendar months.
There is another important factor business owners sometimes overlook:
Affiliates can count.
When determining size, SBA rules can require a business to include employees or receipts from affiliated companies. Affiliation generally involves the power of one business or person to control another, whether or not that power is actually exercised.
So looking at your company’s latest annual revenue or simply counting the employees on today’s payroll may not give you the complete answer.
What Is the SBA Proposing to Change?
The August proposal would make some substantial changes to the current system.
1. Fewer Size-Standard Categories
SBA is proposing a move toward broader four-digit NAICS classifications where appropriate, rather than relying as extensively on separate six-digit classifications.
According to the agency, this would reduce the number of size-standard categories from nearly 1,000 to 338 broader industry groupings.
That’s a reduction of roughly 65%.
The idea is to make determining small-business status simpler while creating standards that SBA believes better reflect today’s competitive markets.
2. Much Higher Limits in Some Industries
This may be the biggest part of the story for growing businesses.
Some proposed size thresholds aren’t increasing by a few percentage points. They’re increasing substantially.
Consider several examples supplied directly by SBA:
| Industry | Current threshold cited by SBA | Proposed threshold |
|---|---|---|
| Semiconductor manufacturing | 1,250 employees | 2,800 employees |
| Shipbuilding | 1,300 employees | 2,300 employees |
| Oil drilling | 1,000 employees | 2,650 employees |
| Support activities for animal production | $11 million receipts | $71 million receipts |
A semiconductor manufacturer employing 2,000 people doesn’t sound like a “small business” in everyday conversation.
Under the proposed SBA standard, however, it potentially could be.
And that’s where understanding the purpose of these standards becomes important.
How Can a Company With 2,000 Employees Be a “Small Business”?
Because “small” is relative to the industry in which a company competes.
A 2,000-employee manufacturer might sound enormous compared with a local contractor, accounting practice, retailer or consulting firm.
But that manufacturer may be competing against multinational corporations employing tens of thousands of people and generating billions of dollars in revenue.
SBA size standards aren’t designed simply to determine whether a company feels small.
They’re intended to establish the maximum size at which a business can still be treated as small within its particular industry for applicable federal programs.
That’s why the thresholds can vary so dramatically.
And it’s one reason SBA says the standards need to evolve as industries grow and change.
SBA Is Also Rethinking How Markets Are Defined
Another interesting part of the proposal involves the geographic scope of competition.
Not every industry competes in the same kind of market.
A technology company might compete for customers nationally—or internationally—while businesses in some retail, construction and service industries may compete primarily within much smaller geographic markets.
SBA’s proposed methodology attempts to account for differences like these when evaluating industry market size and competitiveness.
That does not necessarily mean two otherwise identical companies will receive different size standards simply because they’re located in different states.
Instead, geographic competition becomes part of the methodology SBA can use when determining the characteristics and competitive environment of an industry.
The broader objective is to make the definition of “small” better reflect how businesses actually compete.
Why Being Classified as “Small” Can Be a Big Deal
This isn’t simply about what label appears next to a company’s name.
SBA size standards help determine whether businesses are eligible to participate in certain federal programs and compete for federal contracts reserved or set aside for small businesses.
The proposed changes could therefore make additional businesses eligible to pursue SBA lending programs, federal small-business contracting opportunities and other programs—provided they meet all the other requirements of the particular program.
That’s an important distinction.
Being classified as small doesn’t automatically guarantee a loan, government contract or access to every SBA program.
But it can open the door to opportunities that otherwise wouldn’t be available.
And that creates an intriguing possibility.
A company could potentially grow out of “small business” status—and then qualify again.
Imagine a successful business that gradually exceeds its industry’s existing SBA size threshold.
As a result, the company loses its small-business classification for certain federal purposes.
If SBA subsequently raises that industry’s threshold substantially, the same company could potentially fall within the definition again.
That’s why these proposed changes deserve attention from established companies as well as startups.
Could Your Business Suddenly Become “Small”?
Potentially.
SBA says the proposed changes would add more than 110,000 employer firms to the small-business population.
Among the approximately 6.3 million employer firms in the United States, SBA describes that as roughly a 1.8% expansion.
For a very small company with five employees, the new standards may not make much practical difference. That business probably already falls well below its applicable size threshold.
But the proposal becomes much more interesting for companies that:
🔹 Have grown close to or beyond their existing SBA size limit
🔹 Operate in industries receiving substantially higher proposed thresholds
🔹 Want to pursue federal contracting opportunities
🔹 Previously lost small-business eligibility because of growth
🔹 Have expanded through acquisitions or affiliated businesses
🔹 Operate across multiple business activities or NAICS classifications
For those businesses, the government’s definition of “small” could have very real financial consequences.
📅 Why September 17 Matters
Before anyone begins planning around the proposed standards, there’s an important point to remember:
The rules aren’t final.
Tomorrow, Thursday, September 17, 2026, the SBA will hold a virtual public forum specifically addressing the proposed size standards and revised methodology.
The SBA says testimony presented at the forum will become part of the administrative record used in developing the final rule.
The agency is particularly encouraging participation from businesses that currently sell to the federal government and organizations involved in providing companies access to capital.
Written comments can also be submitted through the federal rulemaking process under RIN 3245-AI67.
That’s important context because the final standards could differ from what is being proposed today.
For business owners, tomorrow’s forum is another step in the process—not the finish line.
⚡ Pro Tip: Find Your NAICS Code Before You Assume You Don’t Qualify
One of the easiest mistakes a business owner can make is assuming “small business” has one universal definition.
It doesn’t.
Your applicable NAICS classification can determine the size standard against which your business is measured.
Businesses can also conduct activities that fall under multiple NAICS codes, while individual federal contracting opportunities are assigned particular industry classifications.
Before deciding you’re too large—or assuming you’re small enough—identify the relevant NAICS code and check the applicable SBA standard.
The SBA provides an official Size Standards Tool specifically for this purpose.
A Simple Example
Suppose a company has grown rapidly during the past several years.
It now has:
Annual receipts: $24 million
Employees: 140
Industry: A sector using a receipts-based SBA standard
Is it still a small business?
There’s not enough information to answer that question.
You would first need to identify the applicable NAICS classification and its corresponding size standard.
Then you would need to calculate receipts according to SBA rules rather than simply looking at this year’s sales.
And if the business has affiliates, their receipts may also have to be included.
That’s why a company shouldn’t automatically assume it’s too large—or small enough—to qualify.
What Should Business Owners Do Right Now?
The proposal isn’t final, so companies shouldn’t make eligibility decisions using the proposed thresholds yet.
But that doesn’t mean there’s nothing to do.
1. Identify Your NAICS Classification
Determine which NAICS codes accurately describe your company’s products or services.
2. Check Your Current SBA Size Standard
Use the official SBA Size Standards Tool instead of relying on a generic definition of small business.
3. See How Close You Are to the Current Limit
Businesses approaching or recently exceeding their existing threshold have an obvious reason to monitor the rulemaking process.
4. Look at the Proposed Standard for Your Industry
Some of the proposed increases are significant. Companies that previously dismissed SBA opportunities because they were too large may want to revisit that assumption if the proposal becomes final.
5. Review Potential Affiliations
Subsidiaries, ownership structures and relationships with other businesses can affect SBA size calculations.
6. Follow What Happens After the September 17 Forum
The testimony and written comments submitted during the rulemaking process will be considered by SBA before it develops the final rule.
Until that happens, today’s standards remain the ones businesses should use.
Don’t Confuse “Proposed” With “Approved”
This distinction deserves emphasis.
A headline saying the SBA is “redefining small business” can easily sound as though the changes have already happened.
They haven’t.
SBA announced the proposed overhaul on August 20, 2026.
The agency is still accepting and evaluating input, including testimony at the September 17 public forum.
Until a final rule is issued and becomes effective, businesses should continue using the currently applicable SBA size standards when determining their eligibility.
Frequently Asked Questions
Is every business with fewer than 500 employees considered a small business?
No.
You may frequently see 500 employees used as a broad statistical definition of small business, but SBA program and federal contracting eligibility relies on industry-specific size standards.
Are SBA size standards based on revenue or employees?
Both can be used.
Which measurement applies depends largely on the company’s industry and NAICS classification.
Do affiliated companies count toward my size?
They can.
SBA rules require businesses to account for affiliates when calculating size where the affiliation rules apply. That can mean including affiliated employees or receipts.
Have the new 2026 SBA size standards taken effect?
No.
As of September 16, 2026, the major changes announced August 20 remain proposed.
What happens on September 17?
SBA will hold a virtual public forum to hear testimony concerning the proposed size standards and revised methodology.
According to SBA, testimony will become part of the administrative record and will be considered along with written comments when the agency develops its final rule.
Could a company that’s currently too large become eligible?
Potentially.
Because many proposed thresholds would increase, some companies that exceed today’s standards could fall within a new threshold if the applicable proposal becomes final.
Eligibility would still depend on the final rule, the company’s industry, applicable size calculations, affiliation rules and the requirements of the particular federal program or contract.
The Bigger Picture: Growth Shouldn’t Automatically Close the Door
Perhaps the most interesting part of the SBA proposal is what it says about the changing scale of American business.
A company can grow considerably and still be relatively small compared with the dominant competitors in its industry.
That’s particularly true in capital-intensive industries where businesses need significant workforces, equipment, technology and revenue simply to compete.
SBA’s proposal attempts to account for that changing reality while simplifying a classification system that has grown increasingly complex.
For entrepreneurs and established business owners, there’s also a practical lesson:
Don’t assume your company is too large—or too small—for an opportunity until you check.
Industries change. Businesses grow. Government standards change with them.
And if the SBA ultimately adopts these expanded standards, more than 110,000 additional employer businesses could find themselves looking at opportunities that weren’t previously available to them.
For some growing companies, being redefined as “small” could turn out to be a very big deal.
Official Government Resources
U.S. Small Business Administration — Proposed Size Standards Overhaul
SBA’s August 20, 2026 announcement explains the proposed changes, the 110,000-business estimate, industry examples and the move toward broader NAICS classifications.
U.S. Small Business Administration — September 17 Public Forum
SBA’s official announcement explains the public testimony process and how comments will be considered when developing the final rule.
U.S. Small Business Administration — Size Standards Tool
Business owners can use SBA’s official tool to check whether their business currently qualifies as small for government contracting purposes.
This article is intended for general informational purposes and should not be considered legal, financial or government-contracting advice.
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