Picture the guy. He runs a nine person machine shop in Ohio that has been chasing a federal set aside contract for two years. This morning the agency whose entire reason for existing is him announced that his competition now includes a shipbuilder with 2,300 employees.
SBA release 26-85, dated today, is titled as a proposal to simplify small business classification and expand access to federal programs. The expansion is real. The word doing the work is up.
The Ceiling Moves. The Floor Never Does.
Here are the thresholds the SBA wants to raise, straight from the release.
| Industry | Small used to mean | Small would now mean |
|---|---|---|
| Semiconductor manufacturing | 1,250 employees | 2,800 employees |
| Shipbuilding | 1,300 employees | 2,300 employees |
| Oil drilling | 1,000 employees | 2,650 employees |
| Animal production support | $11 million in receipts | $71 million in receipts |
Read the last row twice. The revenue ceiling for that category goes up by a factor of six and a half. A firm doing $70 million a year in sales gets to walk into a program built on the premise that it cannot compete with the big guys.
Nobody at any point proposed moving the other end. There is no floor. There never has been. The nine person shop in Ohio was small before this rule and will be small after it, and the only thing that changed is how many larger companies are standing in the same room.
The Pie Is Set By Statute. The Guest List Is Not.
Federal small business contracting runs on a number written into law: 23 percent of prime contract dollars. That is the goal. It is not a budget line that swells when the SBA edits a definition.
The FY25 scorecard, SBA release 26-64 from June 25 of this year, says the government beat it. Small businesses took 27.99 percent of prime contracting dollars, worth $179 billion. Add subcontracts and the figure reaches $273 billion. The agency counts 793,400 jobs behind the prime awards and 418,000 behind the subcontracts.
That $179 billion does not grow by one cent because 110,000 more companies became eligible to bid on it. The pool is fixed by a percentage of federal purchasing. The number of straws going into it just went up.
And here is the part that should make anyone in a set aside program sit forward. The same scorecard records that 8(a) firms, the ones in the program built specifically for socially and economically disadvantaged owners, took 3.7 percent of prime dollars, worth $24.3 billion. That is down $1.5 billion from the year before.
So the smallest, most protected slice of this thing was already shrinking in real dollars before anybody proposed letting a 2,800 person chip fabricator into the category.
Three Hundred And Thirty Eight
The other half of the proposal is a filing cabinet reorganization, and it is genuinely enormous. The SBA wants to collapse more than a thousand separate industry size standards down to 338, a reduction of roughly 65 percent, by moving from six digit NAICS codes to four digit ones. It also wants to add regional market considerations to some thresholds.
Anyone who has ever tried to work out which six digit NAICS code their business actually falls under, and then discovered that the answer determines whether they are small, understands why this matters. The code system is a maze that a person can lose a week inside. Cutting it by two thirds is a real kindness.
It is also how the ceilings go up quietly. When you merge four narrow categories into one broad one, the broad one takes the most generous threshold in the group. That is not a conspiracy. It is arithmetic. It is what merging does. But it means the simplification and the expansion are the same act wearing two different press releases.
The Part That Is Actually Fine
This site exists to be angry at the SBA, so here is the case against being angry at this one.
The size standards are required by law to be reviewed and updated every five years. This is not a favor to anybody. It is a chore the agency owes Congress, and skipping it would be the scandal.
The scale is also small. The SBA counts 110,000 newly eligible firms against roughly 36 million American small businesses, which works out to a 0.3 percent expansion of the category, and a 1.8 percent expansion of the 6.3 million businesses that actually have employees. Eric Pacifici of SMB Law Group put it to Forbes about as flatly as it can be put: to those 110,000 businesses, it is great, and to the rest, it is not earth shattering.
Inflation is real too. A $11 million receipts ceiling written years ago does not buy what it used to, and a firm that grew into a threshold without getting any more competitive has a legitimate complaint about falling off a cliff on paper.
Administrator Kelly Loeffler frames it as regulatory certainty and expanded access to capital, counseling and contracting. All three of those are things the agency is supposed to provide.
The Number Under The Number
Every one of those defenses is true and none of them touches the actual problem, which is that the SBA has now spent a year raising ceilings and never once raising a floor.
It doubled the cumulative 7(a) and 504 loan limit to $10 million. It is proposing to let a 2,650 employee oil driller call itself small. It exceeded a 23 percent contracting goal while the 8(a) share fell by $1.5 billion. Every one of those moves helps a company that is already near the top of the category, and not one of them helps the nine person machine shop that has never gotten past a bid evaluation.
The rule is expected to take effect by the end of 2026. When it does, the federal government will have 110,000 more small businesses and exactly the same amount of money set aside for them.
That is not a definition change. That is a seating chart.