The federal government’s definition of a “small business” may be changing — and for companies that sell to the government or rely on SBA programs, the consequences could be significant.
The U.S. Small Business Administration is considering a major revision of its size standards, including both the methodology it uses to determine who qualifies as small and the specific thresholds applied across industries.
On September 17, the SBA will hold a virtual public forum to receive testimony on the proposals. That testimony will become part of the administrative record the agency considers before issuing a final rule.
For businesses near an SBA size threshold, this is more than a technical regulatory exercise. The eventual changes could determine whether they remain eligible for federal small-business contracting opportunities and other SBA programs.
What Happened
In August, the SBA proposed a broad overhaul of its small-business size standards.
The proposal would simplify the system by moving toward broader four-digit North American Industry Classification System, or NAICS, industry groupings. According to the SBA, this would reduce the number of separate size-standard categories from nearly 1,000 to 338.
The agency is also proposing higher thresholds in numerous industries.
The SBA estimates that the changes would result in more than 110,000 additional firms qualifying as small businesses.
On September 11, the agency announced that it would accept public testimony on the proposed changes at a virtual forum scheduled for September 17.
Businesses may also submit written comments.
What the Proposal Would Do
The proposal could change both how the SBA calculates size standards and where it sets the thresholds.
Under the revised methodology, the SBA would change the formula used to translate industry economic characteristics into a size standard.
Among the changes, the agency proposes eliminating an explicit maximum size standard used under the previous methodology. That could allow substantially higher thresholds in industries where economic data supports them.
The methodology would also add a productivity adjustment to monetary-based size standards, rather than relying primarily on inflation adjustments.
Some proposed increases are substantial.
For example, the SBA says the employee-based size standard for semiconductor manufacturers would rise from 1,250 to 2,800 employees. Shipbuilding would increase from 1,300 employees to 2,300, while oil drilling would increase from 1,000 employees to 2,650.
For support activities for animal production, the receipts-based threshold would increase from $11 million to $71 million.
These examples demonstrate how materially the definition of “small” could change in certain industries.
Who It Affects
The most immediate impact is on companies that participate — or want to participate — in federal contracting.
Federal agencies reserve certain procurement opportunities for businesses that qualify as small under SBA standards. Moving the threshold can therefore change the competitive field for those contracts.
A growing company that previously exceeded its industry’s threshold could potentially regain or retain small-business eligibility.
The proposal could also affect businesses using SBA lending and other programs where size eligibility applies.
The SBA has specifically encouraged companies selling to the federal government and organizations that provide businesses with access to capital to participate in the September 17 forum.
Arguments and Considerations on Both Sides
The case for revising the standards is straightforward.
Businesses and industries have grown, costs have increased, productivity has changed and some existing classifications may no longer accurately reflect today’s economy.
Higher thresholds could also address an unusual problem created by government programs: successful small businesses can eventually grow beyond eligibility and suddenly find themselves competing directly against much larger companies.
Allowing companies to remain classified as small for longer could provide a smoother transition.
There is another side.
Expanding eligibility means more businesses can compete for opportunities specifically intended for small businesses. Existing small contractors could therefore face increased competition from considerably larger companies that newly qualify under higher thresholds.
The broader the definition of “small business” becomes, the more important the question becomes: Which businesses are federal small-business programs actually intended to help?
That is one of the practical policy questions the SBA will ultimately have to resolve.
Where It Stands
These changes are proposals, not current requirements.
The SBA published its proposed size-standard changes and revised methodology in August and is currently receiving public input.
The September 17 virtual forum is part of that process. Oral and written testimony submitted through the process will become part of the administrative record the SBA considers when developing the final rule.
Businesses should therefore not treat the proposed thresholds as existing eligibility standards.
What Businesses Should Watch
Companies involved in federal contracting should determine whether the proposed standard for their industry differs materially from the existing standard.
Businesses near their current size threshold have the most obvious reason to pay attention.
Companies should also consider the competitive impact, not simply their own eligibility. A business that remains comfortably below its industry’s threshold could still find itself competing against larger companies if the threshold rises significantly.
And businesses that believe the proposed methodology or industry threshold creates an unintended competitive consequence still have an opportunity to participate in the rulemaking process.
The immediate date to watch is September 17, 2026, when the SBA holds its virtual public forum.
The more important date will come later, when the SBA determines what changes survive the public-comment process and appear in a final rule.
Until then, businesses should treat this as an important proposed change — not a change in the law that has already taken effect.
Sources
U.S. Small Business Administration — September 11, 2026: SBA to Consider Public Testimony on Proposed Size Standards Rules
U.S. Small Business Administration — August 20, 2026: SBA Proposes Overhaul to Simplify Small Business Classification and Expand Access to Federal Programs
Federal Register — Small Business Size Standards: Revised Size Standards Methodology
Federal Register — Small Business Size Standards