The U.S. Small Business Administration (SBA) recently issued a final rule adopting a 24-month — as opposed to the current 12-month — average to calculate a business’s number of employees for eligibility purposes in all SBA programs that contain employee-based size standards. SBA’s new rule — which takes effect July 6, 2022 — is discussed below.
Link to Background Background
- Previously, SBA required the use of a 12-month average to calculate a business’s number of employees for industries subject to an employee-based size standard.
- For manufacturers subject to SBA’s employee-based size standards, the 2021 National Defense Authorization Act changed the averaging period to 24 months.
- In November 2021, SBA issued a proposed rule to amend its regulations by changing the 12-month averaging period to 24 months for all SBA programs and all industries subject to an employee-based size standard.
Link to Key Features Key Features
- SBA’s final rule applies to all employee-based sized standards — not just those that pertain to manufacturers.
- Unlike SBA’s implementation of the Small Business Runway Extension Act of 2018 — which provided a two-year transition period during which a business could use either a five-year or a three-year average to calculate annual receipts for size purposes — SBA’s new rule does not provide for a transition period where businesses can use either a 24-month or a 12-month average to calculate their number of employees.
- However, the final rule provides that, for purposes of determining eligibility in the Business Loan, Disaster Loan, Small Business Investment Company, and Surety Bond Guarantee Programs, businesses may now use either a five-year or a three-year average.
- SBA’s final rule is effective July 6, 2022.
Conclusion
If you have any questions about SBA’s final rule or any related issues, please feel free to contact Aron Beezley or Gabby Sprio.