SBA redefinition of small business draws mixed reactions

As the Small Business Administration redefines exactly how big a small business can be, it faces mixed reactions from lawmakers and small business groups.

SBA published its new guidelines in the Federal Register on Feb. 10, with the rules scheduled to go into effect March 12. The comprehensive review in size standards, the first SBA has undertaken since the early 1980s, determined that larger businesses in 34 industries and three sub-industries in the professional, scientific and technical services sector could be considered small businesses.

Under the new rules, more weight is placed on business structural characteristics, including average firm size, the degree of competition and federal government contracting trends, in order to cast a broader net over businesses eligible for government programs. SBA estimates that as many as 8,350 additional firms will become eligible for its programs as a result.

The National Federation of Independent Business, a lobbying organization that represents about 350,000 small businesses across the country, defines anything that is not publicly held as a “small business” for purposes of membership. NFIB spokeswoman Jean Card, however, emphasized that more than 70 percent of the group’s members have 10 employees or fewer, and 97 percent have 50 or fewer.

Card noted that defining small business is no easy task. “I don’t envy them,” she told Government Executive, but added she was “not real clear on why the definition changed.”

Small businesses, Card said, are looking for more government help with issues like tax regulation and health care policy.

The National Small Business Association, a nonprofit membership organization, will be talking with its members next week regarding the advantages and disadvantages of SBA’s move. NSBA limits its membership to businesses with fewer than 500 employees and does not distinguish by industry or revenue.

“We have a few general concerns with it lumping together businesses that have different interests and concerns -- for example, the lumping together of architecture and engineering firms,” NSBA spokeswoman Molly Brogan said of the new classification system.

Some congressional lawmakers unhappy with SBA are seeking to implement new legislation that would require the government to see small businesses in a different light.

“If the size standards are adjusted then we don’t need to change the definition, but we do need complementary incentives for advanced [and] growing small businesses,” said Rep. Gerry Connolly, D-Va., co-author of the Small Business Protection Act, which was introduced in the House on Feb. 8.

The bill, also co-authored by Rep. Joe Walsh, R-Ill., seeks to redefine the size standard for each small business category so that it remains within each group’s North American Industry Classification System code, according to a Feb. 8 press release from Walsh’s office.

As part of President Obama’s fiscal 2013 budget proposal, SBA received a 30-percent boost in federal funding from fiscal 2011 actual discretionary expenditures.