- The U.S. Small Business Administration, the federal agency that provides loans and other assistance for small businesses, expanded its definition of what counts as a small business in a regulation published last week.
About 4,000 more companies will have access to SBA loans totaling between $20 million and $25 million as a result of the change, according to estimates put together by SBA economists.
Under current rules, SBA loans are set aside for businesses that fall below a certain employee count and can't find reasonable credit elsewhere. But the maximum employee count varies by the industry. Car dealerships, for example, are capped at 200 employees, while an airline can employ as many as 1,500 and still be technically considered a small business.
The agency has been in the process for several years in changing the limits for various industries. The regulation posted Monday primarily affects various sorts of wholesalers, which are currently capped at 100 employees. The new rules means that some can be more than twice as large and still qualify for government assistance.
Those that sell roofing and insulation wholesale, for example, will see their cap raised to 200 employees. Wine and liquor wholesalers will be able to employ as many as 250 and still be considered a small business.
Not everyone is happy with the changes. In public comments posted on the SBA's online regulatory portal, numerous companies and advocacy groups said the changes would hurt small businesses by giving financial assistance to companies that are not actually small.
"The ongoing expansion of the definition of ‘small’ is crippling [truly small businesses’] ability to get loans," wrote Diane Blakeman, chief operations officer at the Crankset Group, a business consultancy.
Others argued that loans should be doled out on the basis of revenue, not employee count. Highly profitable companies with few employees have fewer barriers to financing and, therefore, have less need for government assistance, commenters said.
The agency argued whether raising the employee cap would have any influence on the smallest firms.
"Since the vast majority of firms that obtained SBA's loans are well below the current 100-employee size standard, the Agency does not believe that increasing it to 200 or 250 employees will have a significant negative impact on firms below the current size standard," the agency wrote in response to the comments. The standards don't apply to procurement standards, so contracting opportunities are not affected by the change, the agency says.