How the SBA Defines a Small Business

The two measures: revenue and employees

Most industries use either average annual receipts or average employee count. The SBA publishes a table of size standards by NAICS code.

Service and retail businesses are generally measured by average annual receipts. Manufacturing and some other industries are measured by number of employees. The threshold differs widely between industries, from a few million dollars in revenue for some services to hundreds or more employees for some manufacturers.

Because the thresholds are updated periodically, do not rely on remembered numbers. The SBA's size standards table on SBA.gov is the source to check.

Find your NAICS code first

The North American Industry Classification System assigns a code to your primary business activity. That code determines which size standard applies.

Your code may already be on your tax return or business registration. If not, look up the code that best matches what generates most of your revenue. A restaurant, a trucking firm and a software developer all have different codes and different thresholds.

If your business has several activities, the SBA generally looks at the primary one. When it is unclear, ask an SBDC advisor or your lender before filing.

How revenue and headcount are averaged

The SBA usually averages receipts over several years and counts employees over a recent period. It also includes affiliates in the calculation.

Averaging means one unusual year does not decide your status. Headcount typically includes full-time, part-time and temporary workers, not only full-time staff.

Affiliation matters. If you control or are controlled by another business, or share ownership or management with it, the SBA may add its size to yours. Owners with several companies should get advice before assuming each is small on its own.

Why the definition matters for funding

SBA loan programs, set-asides for government contracts and some grants require a business to meet the SBA size standard.

For loans, a lender must confirm you are eligible. For contracts, small business set-asides apply only to qualifying businesses. Meeting the standard is one requirement among others, such as being for-profit and operating in the U.S. See SBA loan requirements for the full set.

Most owners seeking a typical loan are well below the limit. The size test mostly bites businesses that are growing quickly or have affiliates.

What small means for non-SBA financing

Private funders do not use SBA size standards. They look at revenue, time in business, credit and bank activity.

If you are above the SBA threshold, or want something faster, other products exist. ROI Funder considers 500+ FICO, 6+ months in business and $20,000+ monthly revenue, and funds businesses up to $5,000,000 in amount. That is a funding range, not a size standard.

Options include term loans and a business line of credit. Our overview of small business statistics adds context on how many companies fall into each size group.

A quick self-check

Find your NAICS code, look up the standard, compare your averages, then list any affiliates. If you are near the line, confirm with the SBA or a lender.

1. Identify your primary NAICS code.
2. Look up that code's size standard on SBA.gov.
3. Calculate your average receipts or headcount using the SBA's method.
4. Add affiliates if any exist.
5. Document the result and keep it with your loan file.

If the result is close, ask a lender early. It is easier to adjust your plan before an application than after a decline. Read what to do if an SBA loan is declined if that has already happened.