SBA Issues Final Rule on Calculation of Average Annual Receipts for the Purposes of Certain Size Standards
Many people think that they know a small business when they see one. But when it comes to eligibility for various government programs designed to assist small businesses, agencies must have a definition of small business that is applied consistently for all. The U.S. Small Business Administration establishes such definitions for small businesses by industry, as identified by OMB-approved industry NAICS codes. These “size standards” are widely used throughout government and are published in the Code of Federal Regulations. Most are based on either a firm’s number of employees or its amount of average annual receipts.
On Dec. 5, 2019, SBA published a final rule modifying its method for calculating average annual receipts used to determine size standards for small businesses. Specifically, in accordance with the Small Business Runway Extension Act of 2018, SBA is changing its regulations on the calculation of average annual receipts for all of SBA’s receipts-based size standards from a three-year averaging period to a five-year averaging period. The five-year average will also be used for other agencies’ proposed receipts-based size standards. SBA’s Business Loan and Disaster Loan Programs are excepted from the new annual receipt calculation rule. SBA intends to seek comment on the Business Loan and Disaster Loan Programs in a separate proposed rulemaking.