A new interim ruling issued last week by the U.S. Small Business Administration (SBA) will allow tens of thousands more businesses, including electrical contractors, to be considered eligible for "small businesses" classification by the SBA.
The SBA's move will allow these businesses to qualify not only for SBA loans, but also for federal small-business contracts, neither of which these businesses were qualified for prior to the new ruling that increases the size thresholds for eligibility.
Overall, the ruling will allow about 90,000 more businesses in the U.S. to qualify as small businesses, which would result in up to $750 million more in federal small-business contracts and as much as $65 million in SBA loans for these companies.
The SBA said the increases are meant to reflect an adjustment to account for inflation, since that threshold had not been increased since 2014.
Besides increasing the actual threshold dollar amount, the SBA is also allowing small businesses to calculate their average annual receipts (for size-standard purposes) over five years, rather than the current three-year average, which should also allow more businesses to qualify for the new higher threshold. The reason for this new measure is Congress felt that the three-year period limited the ability of small businesses to bid on certain projects. In other words, if a company had a really good year in one of the three years, that strong year might disqualify them from the SBA threshold. With the new five-year averaging, that one really good year would be weighted a bit less in the averaging.
For "Electrical Contractors and Other Wiring Installation Contractors" (Classification 238210), the current maximum size to qualify for SBA consideration is $15 million. When the new ruling takes effect on August 19, the new threshold will be $16.5 million, a 10% increase.