SBA proposes rule change for revenue calculations

PROVIDENCE – The U.S. Small Business Administration has proposed modifying its method for calculating annual average revenue for certain small businesses.

The shift, according to the SBA Monday, would change the administration’s regulations on the calculation of annual revenue from a three-year average to a five-year average.

The SBA said that the change would result in many firms regaining or retaining their small business size for federal procurement and SBA loan programs, but also could result in some businesses losing their small business status.

The proposed change is based on the enactment of the Small Business Runway Extension Act of 2018, which was needed for the SBA to change standards for small-business government contractors, since it does not have separate statutory authority to issue size standards for all types of enterprises. The intention of that law was to give those size businesses more time to prepare for entering the open market after they exceed the size standard.

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The passed law specifically changed the averaging period for service businesses from three to five years. The SBA proposal would change all revenue calculations from three to five years, regardless of a business’ industry.

The SBA is soliciting comments on the proposed change, which must be submitted on or before Aug. 23.

More information may be found online.

Chris Bergenheim is the PBN web editor. He can be reached at Bergenheim@PBN.com.