The U.S. Small Business Administration has changed the guidelines it uses to determine what a "small business" actually is. The new criteria now now allow an estimated 8,500 additional businesses to be eligible for the "small business" title, which comes along with certain federal assistances.
According to a recent Wall Street Journal report, the criteria determining whether or not an organization is a "small business" hasn’t changed since 2008. The new formula varies greatly across industries. For instance, in some industries, a business with up to 1,500 employees may still be considered a small business – so even a family clothing store bringing in more than $38 million per year or a travel agency with $20.5 million per year can both still qualify as "small."
The change has been met with a certain level of criticism since these larger, small business often have an easier time accessing capital than true “Mom and Pops.” Only 39 percent of businesses with revenue under $5 million successfully obtained bank loans last year, according to the report. The new classifications may make competition for those loans even more intense than it was before.
Have you been impacted by the SBA’s new guidelines?
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