Government Contracts SBA Changes Method for Calculating Annual Average Receipts
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Monday, January 6, 2020

SBA Changes Method for Calculating Annual Average Receipts

By Government Contracts Editorial Staff

A final rule modifies how the Small Business Administration calculates annual average receipts for small business size standards. The rule, which amends SBA 121.104, SBA 121.106, and SBA 121.903, changes the method for calculating average annual receipts for all of SBA’s receipts-based size standards, and for other agencies’ proposed receipts-based size standards, from a three-year averaging period to a five-year averaging period. SBA’s size standards establish eligibility for a variety of small business assistance programs, including the 8(a) Business Development, Historically Underutilized Business Zone, Service Disabled Veteran-Owned Small Business, Women-Owned Small Business, and Economically Disadvantaged WOSB programs. SBA’s Small Business Investment Company, Certified Development Company, and 7(a) Loan programs use either the industry-based size standards or tangible net worth- and net income-based alternative size standards to determine eligibility.

Transition Period. In response to comments on the proposed rule (¶70,425.634), SBA made two changes to the final version of the rule. First, the rule does not apply to the 7(a) Loan, Microloan, Intermediary Lending Pilot, or Development Company Loan programs, or to Physical Disaster Business, Economic Injury Disaster, Military Reservist Economic Injury Disaster, or Immediate Disaster Assistance Program loans. SBA will issue a proposed rule seeking additional input assessing the impact of any changes to these programs. Second, for all other programs, SBA is adopting a two-year transition period that runs through January 6, 2022. During the transition period, a firm may choose between calculating receipts using a three-year average or a five-year average. The final rule implements the Small Business Runway Extension Act of 2018 (PL 115-324), which amended the Small Business Act at 15 USC 632(a)(2)(C)(ii)(II) to modify the requirements for proposed small business size standards prescribed by an agency without separate statutory authority to issue size standards. SBA issued the rule to promote government-wide consistency on small business size standards. The rule goes into effect January 6, 2020. For the text of the rule, see ¶70,425.643.

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