SBA's test that a business and its affiliates are small enough for a loan: the limit for its industry in 13 CFR 121.201, or an alternative of $20 million net worth and $6.5 million net income.
A borrower qualifies under either of two standards. The industry standard compares the business alone, and then the business with its affiliates, to the limit for its primary industry in 13 CFR 121.201; receipts are taken from federal tax returns. The alternative standard has two tests for the business with its affiliates: tangible net worth of $20 million or less, and average net income after federal income tax, excluding carry-over losses, of $6.5 million or less over the two prior full fiscal years. Both limits rise by 25 percent when the borrower commits to use all the money in a labor surplus area.
Affiliation can add other businesses. Since the rule effective May 11, 2023, SBA no longer treats control alone as affiliation. Ownership still does. An owner of more than 50 percent of two businesses in the same three-digit industry subsector makes them affiliated, so their receipts or employees add together. Example: two restaurants, both more than 50 percent owned by one person, are counted as one.
Size is measured on the date SBA accepts the request, or, on a delegated loan, the date the lender makes its decision. Growth afterward does not affect eligibility. In a business purchase, the buyer and the business bought are measured together.
How it shows up in the data here
Not in the SBA loan file. The file carries a NaicsCode for each loan but no revenue, employee count or net worth, and the lender's size finding is not published. The industry limits are in the table at 13 CFR 121.201, listed by NAICS code. Ask the lender which standard it used.
Go further
- SBA lenders by industry: Twenty-one industry groups, each with the lenders that made loans in it.
- SBA 7(a) loan package checklist: A 7(a) package is the bank's usual file plus SBA's own list. Know which items SBA requires and you can have them ready before the first call.
- SBA 504 loan package checklist: A 504 project has three parties, two loans and a closing date set by a monthly bond sale. Build the package for all three.
Related terms
- Eligible passive company (EPC): A separate company that owns the real estate or equipment and leases all of it to the operating business, allowed under SBA rules when strict conditions are met.
- SBA 7(a) loan: SBA's main business loan program. A lender makes the loan and SBA guarantees part of it: up to 85 percent of $150,000 or less and 75 percent of more, on loans up to $5,000,000.
- SBA 504 loan: A fixed-asset financing in which a bank lends 50 percent or more, a certified development company funds up to 40 percent through an SBA debenture, and the borrower puts in at least 10 percent.
- Credit elsewhere test (SBA): SBA's rule that a loan is eligible only if the business cannot get some or all of the money on reasonable terms elsewhere. The lender must certify it and explain why in its credit memo.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.