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Small Business Size Standards: A Historical Analysis of Contemporary Issues

CRS – Small Business Size Standards: A Historical Analysis of Contemporary Issues, Robert Jay Dilger, Senior Specialist in American National Government. October 4, 2012

  • “Small business size standards are of congressional interest because the standards determine eligibility for receiving Small Business Administration (SBA) assistance as well as federal contracting and tax preferences. Although there is bipartisan agreement that the nation’s small businesses play an important role in the American economy, there are differences of opinion concerning how to define them. The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA to establish size standards for determining eligibility for federal small business assistance. The SBA currently uses two size standards to determine SBA program eligibility: industry-specific size standards and an alternative size standard based on the applicant’s maximum tangible net worth and average net income after federal taxes.
    The SBA’s industry-specific size standards determine program eligibility for firms in 1,047 industrial classifications in 18 sub-industry activities described in the North American Industry Classification System (NAICS). The size standards are based on the following five measures: number of employees, average annual receipts in the previous three years, asset size, annual megawatt hours of electric output in the preceding fiscal year, or a combination of number of employees and barrel per day refining capacity. Overall, the SBA currently classifies about 97% of all employer firms as small. These firms represent about 30% of industry receipts.”
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