How does SBA calculate a “Small” Business?

SBA’s rule states the applicant business (including Affiliates) must meet the following “Small” Business Size Standard:
Maximum tangible net worth may not exceed $15 million; and
The average net income after Federal income taxes (excluding any carry-over losses) for the 2 full fiscal years before the application date may not exceed $5 million.

Effective May 11, 2023, SBA simplified how they determine an affiliated business. This change will typically reduce the number of Affiliates.


What Changed?

The principle of “control” of one entity over another is no longer the basis for establishing affiliation.
Affiliation will no longer be established through franchise, license, and similar agreements. SBA is no longer publishing the SBA Franchise Directory.
The new affiliation regulations are based on the applicant business and if it owns, is owned by, and/or if the individual owner(s) have more than 50% ownership in another business in the same 3-digit NAICS subsector as the applicant business. If 50% doesn’t apply, then a 20% or more rule is applied. Note, ownership interests of spouses and minor children are combined when determining the percentage of ownership.

Please call us at 605.882.5115 for further details or to let us determine whether or not
your applicant meets SBA’s small business size standard.