Last week, Michael, the manager of a client’s SBA lending department, invited me to impart my “SBA wisdom” to his team. Given my long-time experience as an SBA industry instructor – and before that a high school teacher – I enjoy donning my teaching cap from time-to-time.

Michael had suggested a talk on SBA Size Standards. A topic about as dry as “The Latest News About the Square of the Hypotenuse.” But I’d prepared my presentation. So I walked into the conference room and was greeted by about a dozen young 7(a) lenders. Preparation? No need. I got hit with a question from the get-go:

JANIE. Richard, what’s this about different size standards for 7(a) and 504 Loans? The 504 lenders are saying that their size standards have increased by 25%. But we 7(a) lenders never got a notice that 7(a) size standards had increased.

MICHAEL. True. And I read The Federal Register.

ME … resisting comparing The Federal Register to the latest news on the square of the hypotenuse … Let’s clear this up. Your 504 colleagues are talking about size standards for businesses in federally defined Labor Surplus Areas … townships, cities, counties or states with an average civilian unemployment rate during the previous two calendar years of 20% or more above the average unemployment rate for all 50 states and Puerto Rico during the same 24 months. The U.S. Department of Labor publishes a list of LSA’s annually, effective October 1 thru the following September 30.

And yes, size standards increase by 25% for businesses in an LSA for both 504 and 7(a) loans.1 You want to lend to these businesses.

JERRY. I remember something about size standards changing back in February. Is that what you mean?

ME. Nope. A different animal. In February 2024, SBA increased the size standard’s level for tangible net worth to $20 million and for net income to $6.5 million. 2 The net income level of $6.5 million is the average net income after federal income taxes for the preceding two completed fiscal years.

JERRY. Wow! More changes for the next edition of the SOP!!

ME … waiting for the universal sounds of groaning to die down … By the way, The Small Business Jobs Act of 2010 requires that SBA review its size standards every five years. And as luck would have it, 2025 marks the required five-year review. So expect more changes. Also, SBA can make changes more often. For example, in response to ongoing higher than normal inflation, SBA issued an out-of-cycle inflation adjustment to size standards on November 17, 2022.

JANIE How are we supposed to remember all this?

ME. Well, fortunately there’s no need committing it to memory. You’re a JRB client. We track that for you. Also, lenders may request the latest LSA List from us. They just Contact JRB. Michael, we’re sending you a copy.

[Applause. Applause.]

Richard Jeffrey, Senior Associate
Chief Underwriter
richard@jrbrunoassoc.com
www.jrbrunoassoc.com

113 CFR § 121.301(b) (2.) 2 (13 CFR § 121.301(e)