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Women in the Housing & Real Estate Ecosystem (NAWRB) appreciates the opportunity to comment on the U.S. Small Business Administration (SBA)’s Proposed Rule, Small Business Size Standards: Calculation of Annual Average Receipts.This new proposed rule will modify how the SBA calculates annual average receipts in determining size standards for certain industries, including retail trade, agricultural and construction industries. Specifically, the proposal states that the agency intends to change its size standards from a three-year averaging period to a five-year averaging period for calculating annual average receipts for all receipts-based size standards.
According to the official proposal, this change is meant to “promote consistency government-wide on small business size standards” and enable more businesses to gain small business status under the adjusted size standards, making them eligible for benefits such as SBA loan and contracting programs. The SBA estimates that this adjustment will allow almost 90,000 small businesses to gain small business status. This could lead to $750 million in additional federal contracts awarded to small businesses and up to 120 additional small business loans totaling at almost $65 million.
This adjustment to the receipts-based size standards for small businesses seems to be beneficial because it will help advanced small businesses navigate the middle market as they reach their small business size thresholds, and it will allow businesses, at every level, more time to develop their infrastructure and competitiveness. This change will also reduce the impact small businesses might experience from an increase in revenue during their rapid-growth years, which might make them ineligible for the small size standard.
A five-year averaging period will also be more accommodating to the common ebb and flow of business. The amount of revenue a small business makes can vary, sometimes even dramatically, per year. A company can perform well one year but then lose in profits the following year due to a variety of factors, from a personal situation or a natural disaster to new tax laws or tariffs that impact the business’s sales or operation. While one or more lucrative years could negatively impact a business’s small business status in a three-year averaging period, a five-year averaging period is more forgiving.
Increasing the number of small businesses will make the market for procuring contracts more competitive as more businesses become eligible to apply for contracting programs. Women-owned, minority-owned and veteran-owned businesses comprise a large share of small businesses across the nation. If more businesses become eligible for small business status, this will help diversify the pool of companies from which the agency can pull from for contracting opportunities.
In addition, more businesses will benefit from SBA’s loan program (e.g., no cost, low-interest natural disaster loans), which offers invaluable funding opportunities for businesses that need the support to grow and recover from unexpected setbacks. With the destructive natural disasters that have shaken states across the U.S. in recent years, entrepreneurs are in eager need of disaster assistance to rebuild and strengthen.
However, there is the concern that by allowing mid-size businesses to retain their small business status through the new five-year averaging period, smaller businesses will be disadvantaged compared to their larger and more advanced counterparts when competing for federal funding opportunities.
This will be unfortunate as these smaller small businesses are often in more need of capital and do not have as many resources as larger small businesses do. To address this potential issue, the SBA will need to make sure that small businesses at every level are given equal opportunity for federal assistance and contracting opportunities.
Thank you for the opportunity to comment on this significant proposed rule. If you have any questions, please contact me at desiree.patno@nawrb.com or call (949) 559-9800.
Sincerely,
Desirée Patno
CEO & President, NAWRB
About NAWRB
NAWRB is a leading voice for women focused on advancing gender equality, raising the utilization of women-owned businesses and providing women the tools for economic security, stability and sanctuary. We provide one of the most thorough resources for women in the industry, covering a wide-range of topics and issues affecting women in the housing ecosystem from poverty and homeownership to C-suite opportunities and family offices.