So what makes a small business small anyway? Is size measured by the number of employees on the payroll or by the amount of annual revenue a business creates? Is a small business just a business that gives you that mom-and-pop experience? At what point does a small business become a medium-sized business? And do size standards really matter?
All of these are excellent questions, because size does matter when it comes to your small business. It can impact your taxes and revenue, obviously. But it will also affect your business’s eligibility for federal grants and programs. To help you get a clearer picture of how your business compares, the Small Business Administration has created a Table of Small Business Size Standards.
What’s a Size Standard?
According to SBA.gov:
“A size standard, which is usually stated in number of employees or average annual receipts, represents the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA and federal contracting programs. The definition of ‘small’ varies by industry.”
That means that what qualifies as a small business for a creamery (500 employees or less) is different from what qualifies as a small business for a bookstore (less than $25.5 million annually). Many small businesses operate well below the maximum numbers in any case, but it’s important to know where you stand and plan ahead for future growth.
Small Business Size and Loan Eligibility
If you plan to seek a small business loan, the size of your business definitely matters. If you don’t meet the requirements, you won’t be eligible for business loans through the SBA. When you apply for loans that are SBA-guaranteed, the lender will require that you provide certain information to prove your eligibility and evaluate your loan request. This generally includes an outline of your annual sales and the number of employees working for your business and many other details.
Small Business Size and Government Loans
If you’re seeking a government contract, the same standards mentioned above will be considered when awarding bids, and small business certification is important. According to SBA writer Carol Beesley:
“Federal, state and local governments offer businesses opportunities to sell billions of dollars worth of products and services. Many government agencies require that some percentage of the procurements be set aside for small businesses. In this case, having your small business certified can help provide a competitive advantage.”
Protests and Appeals
Did you know the government has set up a way for you to protest and appeal a size determination made by a contracting officer on bids? This means that if you suspect someone has come in with a lower bid and will be awarded a contract on that basis — but the business doesn’t actually qualify as a small business — you can challenge it. In this way small businesses have a more even playing field when it comes to landing government contract jobs.
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