08/26/2026
SBA wants to overhaul small business sizes. Billions of dollars are at stake.
By Andy Medici – Senior Reporter//The Playbook, The Business Journals//August 24, 2026
Story Highlights
* The Small Business Administration aims to reduce industry codes from 979 to 338 categories.
* About 114,541 companies would gain eligibility for federal small business programs.
* Semiconductor manufacturers would see employee maximums rise from 1,250 to 2,800.
The Small Business Administration has proposed a drastic overhaul of its small business definitions, impacting who can access small business loans and grant programs.
The changes, included in a proposed rule in the Federal Register, include dramatically reducing the industry codes under which small businesses are categorized — known as NAICS codes — from 979 six-digit codes to just 338 four and five-digit codes.
At the same time, the SBA is proposing to consolidate a revenue-based size standard and an employee-based size standard, to rely more heavily on employee counts. Previously, the agency has relied on a mixture of both.
The proposed changes
The SBA wants to reduce the industry codes under which small businesses are categorized.
For example, full-service restaurants, limited-service restaurants, cafeterias and buffets, as well as snack and nonalcoholic beverage bars were all categorized under different codes, and all used revenue maximums as the criteria for small businesses. Under the proposed rule, the new category would simply be “restaurants” and the size standard would be based on an 850-employee headcount maximum.
Under the proposed rule, 129 industry codes will use revenue standards, while 208 would use new employee-based counts. Nearly all categories would see either employee maximums or revenue maximums rise, while 45 would stay flat. None would be lower than they currently are.
The SBA gave some examples of higher headcount and size standards: Semiconductor manufacturers would increase from 1,250 to 2,800 employees, shipbuilding would increase from 1,300 to 2,300 employees, and oil drilling would increase from 1,000 to 2,650 employees.
The rules also tinker with more obscure parts of the small business definition standards and how sizes and maximums are calculated by industry. The proposed rule takes seven criteria it uses to judge each industry, such as by average firm size and concentration ratios and replacing them with three: national industry size, number of geographic markets and net-imports adjustments. The SBA is also proposing a "productivity-growth" adjustment to the numbers alongside inflation adjustments that will raise revenue-based size caps over time.
The proposed adjustments are part of a legally-mandated five-year reassessment of size standards, the SBA said. Public comments on the proposed rule are due on or before Sept. 21.
Other changes at the SBA
The size standards are just the latest in a flurry of SBA changes and program rollouts made over the last year. That includes a recent plan to award up to $20 million to help boost critical suppliers.
The Critical Suppliers Prize Competition will focus on businesses that Loeffler said were identifying and solving supply-chain vulnerabilities and bringing supply-chain capacity and jobs back to the United States.
Each one follows the SBA having officially doubled its total loan limit for companies that use the agency's most popular programs.
Under a rule that went into effect July 4, small businesses now are able to combine their 7(a) and 504 loans for up to $10 million in SBA financing. For small manufacturers in particular — companies that currently can secure an unlimited number of 504 loans as long as each loan is tied to a separate project — they now will also be able to apply for $5 million through the 7(a) loan program.
The previous loan limit for combined SBA-backed programs was $5 million.
In June, the agency also announced a partnership with NASA, through which NASA will identify its critical technology and supply chain needs, and the SBA will license and oversee participating investment funds that commit to investing at least 60% of their capital into NASA-identified areas.
Earlier this year, the SBA made manufacturers and related industries eligible for its International Trade Loan Program. Loans through that program come with a 90% guarantee compared to a 75% guarantee for loans made through the SBA's primary 7(a) lending program.
That followed a March announcement that allowed food-related businesses into the ITL program for the same enhanced federal guarantees. That expansion applies to small businesses engaged in select farming sectors as well as ranching and meat production, alongside packaging and machinery manufacturers.
The SBA additionally has embarked on a larger reorganization. The agency on June 5 announced it is establishing the Faith Office and the Office of Rural Affairs as a way to "improve service delivery to faith-based communities, rural small businesses, and domestic manufacturers." It also has been centralizing various functions within its existing offices in a push dating to last year that has seen the SBA cut its workforce in half, consolidate half its leases and terminate or pause more than 120 contracts, moves the SBA said have cut its overall operating budget by 33%.
