Is My Business Too Large for SBA Financing?

“I own a small business.  At least we were a ‘small’ business last time I checked.  Do I qualify for SBA government-backed financing?”

Is this a question that you, as a business owner should be asking?  It might be a good idea if you have outgrown your facilities, and you require financing for a new office or warehouse building.  It might be a good idea if your company has short term bank debt that would benefit from a longer term and lower payments. It might be a good idea if you are contemplating buying a business.  If your business is a “small” business, you might be eligible for SBA government-backed financing.  We will talk about what it means to be eligible as a “small” business, after highlighting the following reasons for taking advantage of SBA (U.S. Small Business Administration) financing:

  • SBA loans provide permanent, long-term financing.  (25 years for small business real estate loans.  10 years for other small business loan purposes.)   Conventional bank financing is typically temporary financing.  A balloon feature requires the small business to re-qualify to refinance the loan in the future.
  • SBA loans typically have lower down payment requirements than conventional bank financing.
  • SBA loans have easier qualifying criteria than conventional bank loans.

Why wouldn’t all businesses want to qualify for SBA financing?  The main reason would be that the business has matured and reached a stage in its operations where favorable financing is readily available due to their long term business track record.  Their track record with their business bankers allows them to negotiate loan terms from the “driver’s seat”.  Many small businesses today, however, are not in that category.  They should consider SBA financing as a tool for growing their business.  In order to be eligible for SBA financing, the borrower must meet the SBA definition of a “small” business.

SBA size guidelines define the maximum size that a firm (including its affiliates) can be to qualify as a small business for most SBA programs.  Size standards usually are a measure of a business’s number of employees or its average annual receipts.  Based on those criteria, the SBA has established the following common standards for a small business, depending on its North American Industry Classification System (NAICS) code:

  • 500 employees for most manufacturing and mining industries, and
  • $7 million in average annual receipts for most non-manufacturing industries.

There are many exceptions, but these are the primary size standards for most industries.

You may take it for granted that your company is a “small business.” The distinction is important if you wish to qualify for SBA financing, or if you wish to register for government contracting as a small business. In addition to the size standard requirement, SBA defines a U.S. small business as a concern that:

  • Is organized for profit;
  • Has a place of business in the US;
  • Operates primarily within the U.S. or makes a significant contribution      to the U.S. economy through payment of taxes or use of American products,      materials or labor;
  • Is independently owned and operated; and
  • Is not dominant in its field on a national basis.

The business may be a sole proprietorship, partnership, corporation, or any other legal form. In determining what constitutes a small business, the definition will vary to reflect industry differences, such as size standards.

Your SBA loan officer will be happy to research and confirm your business’ size standard eligibility for you at the start of the loan application process.  Chances are pretty good that your business is a “small” business!

Small businesses make up:

  • 99.7 percent of U.S. employer firms,
  • 64 percent of net new private-sector jobs,
  • 49.2 percent of private-sector employment,
  • 42.9 percent of private-sector payroll,
  • 46 percent of private-sector output,
  • 43 percent of high-tech employment,
  • 98 percent of firms exporting goods, and
  • 33 percent of exporting value.

Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002-2010,


About Bruce Hurta

Bruce Hurta has extensive experience in Small Business Lending. He has served in a number of commercial lending and banking capacities in his career including, President of a Houston-area community bank for 6 years, managed Independence Funding Company, a non-bank start-up in 1994, where he developed his SBA lending expertise. Bruce spent 4 years in Finance as a bank examiner for the Texas Banking Department, 7 years in executive management at two community banks, and 14 years as SBA Lender. He is active in the commercial realtor and business brokerage communities, along with various business and industry organizations. Bruce Hurta is Vice President - Business Development in Houston, TX for Fidelity Bank SBA Lending nationwide. Fidelity Bank offers SBA 7(a) loans, SBA 504 loans, and USDA loans for small businesses to purchase or construct new buildings for their small business operations, to acquire a business, to expand a business or to buy out a business partner.
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