SBA Procedural Notice 5000-855070: Adoption of the Alternative Size Standard for SBA’s 7(a) and 504 Loans Incorporating an Adjustment for Inflation
Summary
SBA Procedural Notice, Control No. 5000-855070, effective March 5, 2024, to SBA employees, 7(a) lenders and certified development companies, on adoption of the Alternative Size Standard for SBA's 7(a) and 504 loans incorporating an adjustment for inflation. It revises the provisions of SOP 50 10 7.1 on the Alternative Size Standard. The revision incorporates updates made by a final rule SBA published in the Federal Register (89 FR 11703).
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Full text
SBA Procedural Notice
TO: All SBA Employees, 7(a) Lenders, and CONTROL NO.: 5000-855070
Certified Development Companies
SUBJECT: Adoption of the Alternative Size EFFECTIVE: March 5, 2024
Standard for SBA’s 7(a) and 504 Loans
Incorporating an Adjustment for Inflation
The purpose of this notice is to revise the provisions of SOP 50 10 7.1 relating to the Alternative
Size Standard for SBA’s 7(a) and 504 loans to incorporate updates to the Alternative Size
Standard made by the final rule that SBA published in the Federal Register (89 FR 11703),
February 15, 2024. This final rule, which is effective March 18, 2024, makes permanent the
Alternative Size Standard, which was adopted with the Small Business Jobs Act of 2010 (Pub. L.
111–240), subject to adjustment for inflation which has occurred since 2010.
The alternative size standard requires that the applicant, including its affiliates, has a tangible net
worth and average net income that is less than the amounts established in SBA’s regulations at
13 C.F.R. § 121.301. The inflation adjustment increases the Alternative Size Standard's level for
tangible net worth from $15 million to $20 million, including all affiliates. Tangible net worth is
calculated using the most recent balance sheet on the financial statements submitted with the
application.
The inflation adjustment also increases the level of average net income from $5 million to $6.5
million. Specifically, a business using the Alternative Size Standard must have an average net
income after Federal income taxes (excluding any carry-over losses) for the two full fiscal years
before the application date that does not exceed $6.5 million.
An Applicant’s size may be determined using either the Industry Size Standard or the Alternative
Size Standard, depending on which is most beneficial to the Applicant. The Industry Size
Standard measures an applicant’s size based on their primary industry (NAICS Code), using
either annual receipts or the number of employees. When using annual receipts, the number is
calculated based on the average of either the most recent three or five fiscal years, whichever
benefits the Applicant, as described in 13 CFR §121.104(a). When using the number of
employees, the Applicant must count all individuals employed on a full-time, part-time, or other
basis (volunteers are not counted), and the determination is based on the average number of
employees (including domestic and foreign affiliates) for each of the pay periods for the
PAGE 1 of 2 EXPIRES: 3/1/25
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
preceding completed 24 calendar months, as described in 13 CFR §121.106(b). If a concern has
not been in business for 24 months, the average number of employees is used for each of the pay
periods during which it has been in business.
SOP 50 10 7.1, Section A, Chapter 1, paragraph E.1.b is revised as follows:
b. “Alternative Size Standard.” The Applicant (including affiliates) must meet the
following (13 CFR §121.301):
i. The maximum tangible net worth may not exceed $20 million; and
ii. The average net income after Federal income taxes (excluding any carry-over
losses) for the 2 full fiscal years before the application date may not exceed $6.5
million.
Questions
Questions concerning this Notice may be directed to the Lender Relations Specialist in the local
SBA Field Office.
Kathryn Frost
Associate Administrator
Office of Capital Access
PAGE 2 of 2 EXPIRES: 3/1/25
SBA Form 1353.3 (4-93) MS Word Edition; previous editions obsolete
Must be accompanied by SBA Form 58
Federal Recycling Program Printed on Recycled Paper
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