What the SBA’s New “Small Business” Definition Could Mean for Business Owners

Is our current understanding of a small business about to change? Maybe… the definition of a “small business” could soon become much broader under a proposal from the Trump administration that would substantially change how the U.S. Small Business Administration (SBA) classifies companies.

The proposal has attracted attention because, in some industries, companies generating hundreds of millions of dollars—or even more than $1 billion in annual revenue—could potentially qualify as “small.” But what exactly is changing, and what could it mean for small business owners like you? That’s what we’ll be diving into today. 

Why Does the Definition Matter?

The SBA’s size standards determine which companies qualify for a range of federal programs, including certain government contracts, loans, and other forms of assistance. Today, those standards vary considerably by industry, and they’re generally based on either annual receipts or the number of employees. The system is designed to give smaller companies an opportunity to compete for federal business: The federal government has a statutory goal of awarding 23 percent of contracting dollars to small businesses.

The problem, according to the administration, is that the current standards can penalize companies for successfully growing beyond the existing thresholds. A business that crosses the applicable revenue or employee limit can suddenly lose access to programs intended to support small businesses.

 What Is the Trump Administration Proposing?

On August 20, the SBA published a proposed rule in the Federal Register that would overhaul the size standards for 338 industry groups and industries.

The SBA says the changes would add approximately 114,500 businesses to the pool of companies classified as “small.” The agency argues that updating the standards would allow growing businesses to remain eligible for federal programs longer, which would theoretically encourage expansion, investment and competition.

The proposal would also simplify the classification system. Instead of relying on nearly 1,000 individual six-digit industry classifications, the SBA wants to establish size standards at the four- and five-digit NAICS levels, resulting in 338 standards.

Another significant change would be greater use of employee-based standards instead of revenue-based standards. The SBA says this could make a company’s small-business status less vulnerable to fluctuations in revenue, inflation and productivity.

How Big Could the Changes Be?

This is where the proposal becomes particularly noteworthy.

As The New York Times reported, some of the proposed thresholds would be dramatically higher than today’s limits.

For example, the revenue threshold for engineering services could increase from $25.5 million to approximately $252 million. For casinos, the proposed threshold would rise from $34 million to roughly $744 million.

In certain industries, companies with revenue approaching or exceeding $1 billion could potentially meet the proposed definition of “small.”

That doesn’t mean every billion-dollar company would automatically qualify. Eligibility would still depend on the company’s industry, applicable size standard, employee count or receipts, and other SBA rules. 

What Could It Mean for Smaller Businesses?

The proposal has both potential benefits and concerns.

For growing businesses, a higher threshold could offer more room to expand without immediately losing access to federal programs. That could be particularly valuable for companies that are approaching today’s size limits but still consider themselves relatively small compared with major corporations.

For the smallest businesses, however, the expanded definition could mean more competition for a limited pool of federal opportunities. If significantly larger companies qualify as small, companies with only a few employees could find themselves competing against much larger organizations for contracts and other resources.

The SBA says its proposal would expand opportunity rather than take it away; critics argue that expanding the definition too far could dilute the very programs designed to help America’s smallest businesses.

What Happens Next?

For now, business owners don’t need to change their plans based on the proposal. It is not yet a final rule. The SBA is accepting public comments, with comments on the proposed size standards due by September 21, 2026. The agency will review feedback before deciding whether and how to finalize the changes.

For small business owners, the takeaway is simple: watch the definition, but don’t assume your status has changed yet. If finalized, the new standards could reshape who qualifies as a small business—and potentially change the competitive landscape for federal contracts and other government-backed opportunities. We’ll be sure to stay close with this plan over at the Financial Pantry, your best source for news, tips, and information on all things small business.