On August 20, 2026, the U.S. Small Business Administration published a proposed rule that would rewrite how the federal government decides whether a company counts as "small." If finalized as written, the change would collapse nearly 1,000 individual size standards into 338 broader categories and add more than 110,000 firms to the official small business pool — expanding eligibility for SBA 7(a) and 504 loans, 8(a), HUBZone, WOSB, SDVOSB, and federal contract set-asides.

What Is an SBA Size Standard?

A size standard is the ceiling — either in average annual revenue or in average employee count — that a business must stay under to qualify as "small" for SBA programs. Go over it, and you lose access to SBA-backed loans, set-aside contracts, and certifications like 8(a) and HUBZone.

The SBA today keeps a separate size standard for almost every 6-digit NAICS industry code. Some industries are measured by receipts (a landscaping firm, a law practice, a marketing agency), and some by headcount (semiconductor manufacturers, shipbuilders, oil drillers).

That is why a general contractor and a bookkeeper can both be "small businesses" while operating at wildly different revenue levels. The threshold is industry-specific.

Why the classification matters:

• SBA 7(a) and 504 loans. Both programs require the borrower to meet the SBA size standard for its primary NAICS code.
• 8(a), HUBZone, WOSB, SDVOSB. Every SBA certification program is gated by size.
• Federal set-aside contracts. A large share of federal contract dollars are reserved for small businesses in specific NAICS codes.
• SBIR and other grant programs. Same gate.

A quick note on where Novo fits: Novo offers business checking with no monthly fees, and many owners use it as the operating account behind an SBA loan application. Clean books make the receipts calculation defensible, which matters when a lender asks for five years of tax returns.

What Is the SBA Proposing to Change?

The proposed rule, published in the Federal Register on August 20, 2026, would move the SBA from 6-digit NAICS-linked size standards to broader 4-digit category standards. According to the SBA's news release (26-85), the total list of size standard categories would drop from close to 1,000 down to 338 — a roughly 65% reduction.

The proposal would also raise many thresholds. The SBA's own examples in the announcement:

• Semiconductor manufacturers: employee-based standard would rise from 1,250 to 2,800 employees.
• Shipbuilding: from 1,300 to 2,300 employees.
• Oil drilling: from 1,000 to 2,650 employees.
• Support activities for animal production: receipts-based standard would rise from $11 million to $71 million.

Programs affected if the rule is finalized as proposed:

• SBA 7(a) and 504 loans
• 8(a) Business Development Program
• HUBZone Program
• Women-Owned Small Business (WOSB) and Economically Disadvantaged WOSB
• Service-Disabled Veteran-Owned Small Business (SDVOSB)
• Federal small business set-aside contracts

Two things the proposal does not do: it does not change the SBA's affiliation rules (companies with common ownership still have their receipts and employees added together), and it does not change the underlying receipts or employee-counting methodology in 13 CFR 121.104 and 121.106.

The SBA is accepting public comments on the proposed rule. The comment period close date and any expected effective date will be listed on the Federal Register notice for the docket; check the notice directly rather than relying on secondary coverage. Until a final rule is published in the Federal Register and takes effect, the current size standards remain in force. Do not self-certify under the proposed thresholds.

Why the SBA Says the Change Is Needed

Two forces drive the proposal.

The Small Business Jobs Act of 2010 requires the SBA to review every size standard at least once every five years.

The current review cycle is what put this rule on the calendar.

Second, the SBA argues that a decade-plus of inflation, industry consolidation, and pandemic-era revenue growth pushed successful firms out of small business eligibility before they had the scale to compete with genuinely large corporations. Administrator Kelly Loeffler framed the proposal as a way to "reward growth rather than force successful firms out of small business eligibility prematurely."

The stated goals in the SBA's announcement:

• Simplify how firms determine their status by cutting categories by roughly 65%.
• Introduce regional market considerations so thresholds reflect local economic competition.
• Expand the pool of employer small businesses by about 1.8%, or over 110,000 firms.

One point worth calling out: coverage of SBA size rules usually focuses on federal contractors, but the same size standards gate access to SBA-backed lending. An owner who has never bid on a government contract can still be affected — either by newly qualifying for a 7(a) loan of up to $5 million or by keeping eligibility they were about to lose. This is separate from the recent increase in the combined 7(a) + 504 loan cap to $10 million, which changed the maximum an eligible borrower can access, not who qualifies as small.

Who Could Newly Count as a Small Business

The clearest winners are firms that sit just above today's revenue or headcount ceiling for their NAICS code. Under the proposed 4-digit consolidation and higher thresholds, many of these companies would drop back into "small" status.

Concrete effects if the rule is finalized:

• SBA-backed lending. Owners near the current ceiling could become eligible for 7(a) loans of up to $5 million or for 504 real estate and equipment loans.

• Federal contracting. Firms that aged out of 8(a) or HUBZone eligibility on revenue grounds could requalify, depending on the final thresholds and the SBA's transition rules.
• Certification renewals. Existing 8(a) and HUBZone participants whose recertification date falls after the effective date would be measured against the new standards.

The SBA's own examples — semiconductors, shipbuilding, oil drilling, animal production support — signal where the biggest headcount and receipts jumps land. The full list of affected NAICS codes is in the proposed rule text on the Federal Register.

The effect on solopreneurs and micro-businesses is limited. A one-person consulting practice or a two-truck plumbing company is already well under the current threshold for its NAICS code. The proposal matters most to growing mid-sized firms bumping against the ceiling.

How to Document Revenue and Payroll for SBA Size Certification

Whether the proposed thresholds take effect or not, the SBA's methodology for measuring size is unchanged and worth knowing before you apply for a loan or certification.

Receipts-based standards. The SBA calculates average annual receipts using the past five completed fiscal years of federal tax returns. The rule is codified at 13 CFR 121.104.

"Receipts" means total income plus cost of goods sold, as reported on the business's federal return — not net income.

Employee-based standards. The SBA uses the average number of employees per pay period over the prior 24 months, per 13 CFR 121.106. Part-time, temporary, and seasonal employees all count.

Records to pull now:

• Federal tax returns for the last five completed fiscal years (Form 1120 for C-corps, 1120-S for S-corps, 1065 for partnerships, or Schedule C for sole proprietors).
• Payroll registers covering the last 24 months, showing headcount per pay period.
• A list of affiliated companies — anyone with common ownership, common management, or identity of interest — whose receipts or employees the SBA may aggregate with yours.

How a clean business bank account helps: separating business revenue from personal income makes the receipts calculation defensible when a lender or contracting officer asks for backup. Novo offers a business checking account with no monthly fees that integrates with Stripe, Shopify, and QuickBooks, though it does not accept cash deposits, so a cash-heavy business will need a different setup or a workaround.

When to loop in your CPA:

• You use a fiscal year that doesn't match the calendar year.
• You have affiliated entities under 13 CFR 121.103.
• Your revenue or headcount sits within 10% of the size standard for your NAICS code.

A recordkeeping template you can paste into an LLM

Use the block below as a starting point for a size-standard file. Paste it into ChatGPT or Claude with the prompt: "Turn this into a Google Sheet with formulas that compute average annual receipts across five years and average employees per pay period across 24 months, with tabs for source documents."

SBA SIZE STANDARD DOCUMENTATION FILE
Business legal name:
Primary NAICS code:
Current SBA size standard (receipts or employees):

RECEIPTS WORKSHEET (if receipts-based)
Fiscal Year | Total Income | Cost of Goods Sold | Total Receipts | Tax Return Form
Year -1     |              |                    |                |
Year -2     |              |                    |                |
Year -3     |              |                    |                |
Year -4     |              |                    |                |
Year -5     |              |                    |                |
Five-year average receipts: =AVERAGE(...)

EMPLOYEE WORKSHEET (if employee-based)
Pay Period End Date | Full-Time | Part-Time | Temp/Seasonal | Total Headcount
(24 rows, one per month)
24-month average headcount: =AVERAGE(...)

AFFILIATES
Entity name | Ownership % | Common management? | Included in aggregation?

That prompt returns a working spreadsheet you can drop your numbers into. Owners who want a lighter-weight approach can also use business sub-accounts to bucket revenue for tax and payroll set-asides, which makes reconciling receipts figures against tax returns easier at year-end.

What Small Business Owners Should Do Now

Five concrete steps while the rule is in comment.

1. Look up your current size standard. Use the SBA's Size Standards Tool at sba.gov/size-standards. Confirm your primary NAICS code and note the current threshold.
2. Submit a public comment. Comments during the Federal Register comment window are how the SBA hears from actual small businesses instead of just from trade associations and law firms. File on regulations.gov under the docket for the proposed rule.
3. Pull records now. Five years of tax returns and 24 months of payroll registers. If you have to recertify under new thresholds, this turns a scramble into a filing exercise.
4. Call your SBA lender. If your revenue or headcount is within 10% of your current size standard and you have a 7(a) or 504 application in flight, ask how a mid-application threshold change would be handled.
5. Ask your contracting officer about certifications. If you hold 8(a), HUBZone, WOSB, or SDVOSB status, ask how the proposal affects your next recertification date. The SBA also recently overhauled the 8(a) program's social disadvantage standard, so certification holders have more than one moving piece to track.

When Does the SBA Size Standard Change Take Effect?

The rulemaking sequence from here:

1. Public comment period on the proposed rule, per the Federal Register notice.
2. SBA response to comments. The SBA reviews the record and may revise the rule.
3. Final rule published in the Federal Register. This is the version that carries the force of law.
4. Effective date. Federal rules typically take effect 30 to 60 days after final publication, though the SBA can set a different date. The specific comment close and effective dates are on the Federal Register notice for this docket — read them there, not from secondary summaries.

Three things to watch:

• The Federal Register for the final rule text and its effective date.
• Public statements from the SBA administrator on timing.
• Any bills in Congress that could delay, modify, or override the rule.

Until the final rule takes effect, existing size standards remain in force. We will update this page when the SBA posts the final rule with the new thresholds and effective date.

Source: U.S. Small Business Administration, news release 26-85, "SBA Proposes Overhaul to Simplify Small Business Classification and Expand Access to Federal Programs," published August 20, 2026.

Disclosures

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