In an attempt to get more businesses to qualify for its financing programs, the U.S. Small Business Administration has proposed expanding its revenue size requirements for three-dozen categories of professional services businesses.
The changes would make nearly 9,500 companies nationwide eligible for its programs; 10 industries would see no change. The SBA did not provide estimates on how many businesses would be affected at the state or county levels; Fairfield County is home to a large contingent of professional services businesses, some of which could find themselves eligible overnight for SBA programs where they had not qualified previously.
Changes reflect economic realities
The SBA said it took several factors into account, including average business size, the degree of competition and federal government contracting trends to ensure that size definitions reflect current economic conditions within those industries.
In most cases, the SBA determines business size by receipts or employment, although for some programs additional criteria can apply such as profits, financial assets or energy capacity.
Over the past few years, the SBA said its published size standards have not reflected changes in the economy and particularly in the federal contracting markets, with the last broad-based overhaul occurring about three decades back. As part of the Small Business Jobs Act of 2010, the agency was required to review its industry size standards every five years going forward.
The SBA is doing so on a staggered basis ”“ first up is professional services. Under the new rules, law firms with $10 million in annual revenue would now qualify for SBA programs, up from $7 million previously. Size standards for many consultancies would double to $14 million, as would those for companies in marketing, advertising and public relations. Accountants would see their top line increase from $8.5 million to $14 million. Several sub-categories in building services, such as architecture and landscaping, would see an increase to $19 million from amounts generally ranging between $4.5 million and $7 million today.
A personal matter for small business
Heading into the recession, Connecticut”™s small-business sector was already contracting according to new federal data. The state had fewer than 73,800 small and mid-size employers in 2008, about 1,300 fewer than in 2007 and nearly 2,600 fewer than at the start of the last decade. The SBA includes companies with 500 or fewer employees in its small-business counts.
It also tracks lone-wolf companies that have no employees ”“ their numbers likewise dropped in 2008 by 2.7 percent, though at 253,000 firms that number was up by some 36,000 companies from 2000.
Minority-owned businesses were easily the fastest-growing category of small business in Connecticut, ranging from a 42 percent growth rate between 2002 and 2007 for companies owned by African Americans to a 55 percent spurt for those owned by Asian-Americans.
In an effort to close a budget deficit, Gov. Dannel P. Malloy has proposed hiking taxes on personal income, which critics say could impact hiring by small businesses that pay taxes using individual income forms.
State Sen. Toni Boucher has proposed allowing small businesses to lock in an income tax rate of 5 percent, with the Connecticut General Assembly at deadline having yet to take action on the bill. Multiple bills would allow small businesses to take a tax credit against Connecticut”™s mandatory $250 tax on business entities, which applies even for companies that have no income.