Business Loans

How Does the SBA Define a Small Business

Feb 22, 2023 • 8 min read
Table of Contents

      According to the U.S. Small Business Administration (SBA), small businesses account for 99.7% of all businesses in the U.S. But what exactly is a small business? Below, we’ll dive deeper into the SBA’s definition of a small business, so you can determine whether you meet SBA loan requirements and qualify for certain benefits.

      SBA small business definition.

      The SBA’s definition of a small business varies by industry and is defined either by a business’s average annual receipts or by the number of employees.

      The SBA’s set size standards for every industry are sorted by the North American Industry Classification System (NAICS). A NAICS code is a six-digit code number that helps companies explain what they do. 

      If you don’t know what your NAICS code is, visit to explore your options. In the event you can’t find a perfect match, go with the closest option. Keep in mind that your NAICS code should describe the primary activity of your business or the one that produces the most revenue.

      Here’s a look at several industries and the maximum average annual receipts (your gross income plus the “cost of goods sold,” based on your federal tax returns) or number of employees (the number of workers you hire each of the pay periods for the preceding completed 12 calendar months) that qualify them as a small business. 

      Only one size standard applies per industry.

      NAICS codeNAICS industry description Size standards in millions of dollars Size standards in number of employees
      236118Residential Remodelers$45.0
      238160Roofing Contractors$19.0
      311513Cheese Manufacturing1,250
      423450Medical, Dental, and Hospital Equipment and SuppliesMerchant Wholesalers200
      445291Baked Goods Retailers$16.0
      458310Jewelry Retailers$20.5
      485310Taxi and Ridesharing Services$19.0
      513110Newspaper Publishers1,000
      522110Commercial Banking$850 million inassets
      541310Architectural Services$12.5
      541810Advertising Agencies$25.5
      561311Employment Placement Agencies$34.0
      561730Landscaping Services$9.5
      611310Colleges, Universities and Professional Schools$34.5

      In addition to maximum average annual receipts and maximum number of employees, the SBA will consider whether your company is headquartered in the U.S. and whether it primarily operates in the U.S. It will also look into whether your company is a for-profit business and whether it’s independently owned and operated.

      Do you qualify as a small business?

      To find out if the SBA considers your company a small business, follow these steps.

      1. Visit the SBA size standards table to locate your industry and NAICS code.
      2. Look at the figure under average annual receipts or number of employees.
      3. Do some math or research to determine if you meet the threshold for average annual receipts or number of employees. 

      You can also go to the SBA size standards tool and plug in your NAICS code. The tool will then ask for your average number of employees or average annual receipts. Based on your answer, it will verify whether you meet the SBA’s criteria for a small business.

      Benefits of being a small business.

      If the SBA does count your company as a small business, you might be wondering how you can take advantage of this classification. Here are some ideas. 

      SBA loans

      There are a number of SBA loan programs that offer low rates and longer repayment terms you might not be able to find elsewhere. The 7(a) loan is the SBA’s most popular program and offers up to $5 million in capital for small business owners. Upon approval, you can use this capital to cover a variety of expenses, such as startup expenses, real estate, short- and long-term working capital, and equipment. 

      Business development programs.

      The SBA has Small Business Development Centers (SBDCs) throughout the U.S. to provide small businesses with counseling, training, and technical assistance. Another organization called SCORE also offers free mentorship and resources. You can utilize these development programs if you qualify as a small business.

      Government contracts. 

      The SBA works partners with federal agencies to award 23% of prime government contract dollars to qualifying small businesses. If you meet the SBA definition for small business, you can submit bids and take advantage of government contracts, which offer an additional, reliable stream of income. 

      Research grants

      The Small Business and Innovation Research research grants are designed to encourage small business owners to dive into technology and commercialization opportunities. While this is a highly competitive program, it also offers small businesses the chance to expand your technological investment and potentially profit from commercialization.

      Tax incentives

      As a small business, you can also save money with tax incentives. The Small Business Health Insurance Tax Credit, for example, gives eligible small business owners the chance to save up to 50% of employee health care costs, if they buy insurance from the Small Business Health Options Program (SHOP). Some cities, like Philadelphia, also award tax credits to entrepreneurs and small business owners.

      Bottom line

      If you believe you’re a small business owner, there’s a good chance the SBA does, as well. But your average annual receipts and number of employees may position you as a medium sized or larger business instead. That’s why it’s wise to do some research and determine where you stand. If the SBA does consider you as a small business, go ahead and take advantage of everything you can! See if you qualify and apply for an SBA loan.


      Just about anyone can start a small business, regardless of education or experience. If you look at the various NAICS codes out there, you’ll know that there is no shortage of industries. While some require a large upfront investment and many resources, others have lower barriers to entry and are easier to get up and running. 

      Several of the most common industries for small businesses include food services, retail, fitness, plumbing and other trades, beauty, healthcare, web design, childcare, and law. As long as you’re motivated with an entrepreneurial drive, you can succeed in any industry you choose.

      Startups and small businesses often get used interchangeably, but there are differences between them. A startup starts with an idea and a business plan. It provides a new product or service or enhances one that currently exists. While startups have a high risk for failure, they can also grow quickly and enjoy high profit within a few years. If you have a startup that evolves into a substantial number of annual receipts and employees, you can eventually turn into a small business and reap the benefits of all of SBA’s offerings.

      Quickly compare loan offers from multiple lenders.

      Applying is free and won’t impact your credit.

      About the author
      Anna Baluch

      Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt University.

      Share Article:

      Business insights right to your inbox

      Subscribe to our weekly newsletter for industry news and business strategies and tips

      Subscribe to the newsletter

      Subscribe to our weekly newsletter for industry news and business strategies and tips.