SBA Proposes Small Business Reclassification to Expand Access to Federal Programs

WASHINGTON (Aug. 20, 2026) — Today, the U.S. Small Business Administration (SBA) proposed a comprehensive overhaul of its small business size standards, modernizing how the federal government defines and classifies small businesses across the United States. Published in a proposed rule, the new standards would simplify industry categorization and raise applicable size thresholds, allowing small but rapidly growing firms to continue qualifying and adding over 110,000 firms to the 36 million small businesses in America. 

“Small businesses are starting and growing at record rates, which is why the SBA is proposing modernized size standards that acknowledge their growth and empower them to compete against large corporations,” said SBA Administrator Kelly Loeffler. “Small businesses create the vast majority of new jobs. This proposal ensures that these job creators have the regulatory certainty to scale, expanding small business eligibility by 0.3%, or over 110,000 firms. By streamlining definitions, the SBA will expand access capital, counseling, and contracting opportunities, which in turn create jobs and drive growth.” 

Mandated by law every five years, this historic update would introduce a market-size approach that would dramatically simplify industry classifications by transitioning from complex separate 6-digit North American Industry Classification System (NAICS) code standards to streamlined 4-digit category standards where appropriate. By cutting the total list of similar industry categories by approximately 65%, down to 338 broader classifications, the SBA seeks to remove regulatory complexities for business owners. 

The proposed standards would also expand the official small business pool by over 110,000 firms, ensuring that rapidly growing companies can continue to qualify as small businesses. By raising applicable size thresholds, the proposal is designed to reward growth rather than force successful firms out of small business eligibility prematurely, especially those in industries that are critical to American strength. 

For example, the employee-based size standard for semiconductor manufacturers would increase from 1,250 to 2,800 employees, ship building would increase from 1,300 to 2,300 employees, and oil drilling would increase from 1,000 to 2,650 employees. The receipt-based side standard for support activities for animal production would increase from $11 million to $71 million. 

These changes would enable more businesses to access SBA loans, compete for federal contracts, and participate in other federal support programs, while reducing the regulatory ambiguity and compliance costs associated with overly narrow industry classifications. 

Key highlights of the proposed size standard overhaul include: 

• Streamlines the existing NAICS structure to a 4-digit classification system that reduces total size standard categories from nearly 1,000 down to 338 broad industry groupings, simplifying how firms determine their small business status. 
• Introduces regional market considerations to ensure size thresholds accurately reflect the realities of local economic competition. 
• Expands the pool of employer small businesses (firms with 1 or more employees) by 1.8%, growing the nation’s 6.3 million employer firms by over 110,000 and adding to the 36 million small businesses that exist today. 

The SBA is seeking comments on the proposed rule. Small businesses can check their current industry classification and size eligibility here.