The Definition of “Small Business” May Be About to Get a Lot Bigger

This story will be featured in the upcoming Financial Poise Weekly newsletter.

The Small Business Administration is proposing a major expansion of what counts as a “small business,” potentially allowing companies with hundreds of millions, or even $1 billion, in revenue to qualify for federal contracts, loans, and other assistance.

According to Sydney Ember and Lydia DePillis from The New York Times:

• The proposal would mean that much larger companies could qualify as “small.” In engineering services, the revenue cap would jump from $25.5 million to $252 million, while casinos could qualify with revenue of up to $744 million– that’s more than 20 times the current cap.
• The SBA estimates that about 114,500 additional companies would qualify as small businesses. Nearly a third of those firms received $71 billion in federal contracts in fiscal 2025, according to the agency.
• Supporters say the new rules would give growing businesses more room to expand without SBA support. But smaller firms worry they’ll now be competing for contracts and loans against much larger businesses with far greater resources.

Our take? The problem proposed change claims to solve is real. Today, a company that grows past the threshold falls off a cliff: one day you’re winning set-aside contracts, the next you’re bidding against Lockheed. So firms either stay artificially small or sell rather than grow. That is a genuinely dumb incentive.

Now look at the fix. Set-aside dollars are a roughly fixed pot, tied to agency goaling percentages. Widening the definition of “small” doesn’t add a dollar to that pot, but it does add competitors. It’s like keeping the same number of handicapped parking spaces and tripling the number of placards. Everybody who actually needed one is still circling the lot.

If you’re a small business owner, now may be a good time to read Navigating Business Financing: Understanding Your Loan Options and brush up on the different ways your business can borrow.