Federal Register - November 2, 2021
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Source: Federal Register
Federal Register / Vol. 86, No. 209 / Tuesday, November 2, 2021 / Proposed Rules < 5-year average size standard and 0.9size standard < 3-year average size standardcontractive impact.
In this proposed rule, SBA is changing the period for calculation of average annual receipts for SBA
receipts-based size standards for Business Loan, Disaster Loan, and SBIC
Programs from 3 years to 5 years. The purpose of Public Law 115324 is to allow small businesses more time to grow and develop competitiveness and infrastructure so that they are better prepared to succeed under full and open competition once they outgrow the size threshold. However, a longer 5-year averaging period may not always and necessarily provide relief to every small business concern. As discussed in the prior proposed rule, when annual revenues are declining or when annual revenues for the latest 3 years are lower than those for the earliest 2 years of the 5-year period, the 5-year average would be higher than the 3-year average, thereby ejecting some advanced small businesses out of their small business status sooner or rendering some small businesses under the 3-year average not small immediately.
There are 4 different types of impacts on small businesses from changes to the averaging period for annual receipts
following 4 possible impacts from changing the averaging period for annual receipts from 3 years to 5 years:
i. The number of mid-size businesses that have exceeded the size standard and would regain small business status in at least one NAICS industry with a receipts-based size standard i.e., 3-year average > size standard 5-year averageexpansive impact;
ii. The number of advanced small businesses within 10 percent below the size standard that would have their small business status extended for a longer period in at least one NAICS
industry with a receipts-based standard 5-year average < 3-year average size standard and 0.9size standard < 3-year average size standardexpansive impact;
iii. The number of currently small businesses that would lose their small business status in at least one NAICS
industry subjected to a receipts-based size standard i.e., 3-year average size standard < 5-year averagecontractive impact; and iv. The number of advanced small businesses within 10 percent below the size standard that would have their small business status shortened in at least one NAICS industry subject to a receipts-based standard 3-year average
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from 3 years to 5 years as follows: i Enabling current large or mid-size businesses to gain small business status impact i; ii enabling current advanced small businesses to lengthen their small business status impact ii;
iii causing current small businesses to lose their small business status impact iii; and iv causing current small businesses to shorten their small business status impact iv.
However, with the SBAs proposal to permit businesses in the Business Loan, Disaster Loan, and SBIC programs to use either a 3-year average or a 5-year average for calculating average annual receipts for the purposes of qualifying as a small business, the two contractive impacts namely impact iii and impact iv do not apply to this proposed rule.
Accordingly, this proposed rule provides the analysis of the two expansive impacts of changing the averaging periods for annual receipts from 3 years to 5 years namely impact i and impact ii only.
Table 8, Percentage Distribution of Impacted Firms with Receipts Based Size Standards by the Number of NAICS
Codes, below, provides these results based on the 2019 SAM2016 SAM
matched firms.
TABLE 8PERCENTAGE DISTRIBUTION OF IMPACTED FIRMS WITH RECEIPTS BASED SIZE STANDARDS BY THE NUMBER OF
NAICS CODES
% Distribution of impacted firms by number of NAICS codes
Number of impacted firms
Impact
1 NAICS
code
25 NAICS
codes
610 NAICS
codes
>10 NAICS
codes
Total
Currently large in all NAICS codes Impact i
899
36.3
33.9
12.6
17.2
100.0
17.8
18.6
100.0
27.4
27.8
22.7
24.3
50.0
47.9
100.0
100.0
Currently small in all NAICS codes Impact ii
1,227
27.3
36.3
Currently small in some NAICS and not small in others Impact i
Impact ii
1,761
1,072
0
0
Total impact by impact type Impact i
Impact ii
2,660
2,299
12.3
14.6
29.6
32.3
19.2
20.8
38.9
32.3
100.0
100.0
Total expansive impact
4,702
14.1
31.8
20.2
34.0
100.0
jspears on DSK121TN23PROD with PROPOSALS1
Impact i = Current large businesses gaining small business status; and Impact ii = Current small businesses extending small business status.
It is highly notable that the distribution of impacted firms by the number of NAICS codes, as shown in Table 8, is very different as compared to a similar distribution based on the overall matched and total 2019 SAM
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data see Table 4, especially with respect to firms with only one NAICS
code and those with more than 5 NAICS
codes. For example, as shown in Table 4, above, more than 40 percent of all firms in the overall data were associated
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with only one NAICS code, as compared to less than 15 percent among impacted firms in Table 8. Similarly, firms with more than 5 NAICS codes accounted for about 20 percent of all firms in the original data, as compared to more than
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