The Small Business Administration quietly dropped a rule change this month that could reshape how hundreds of thousands of companies compete for federal dollars. According to Federal News Network, the SBA has proposed updating its small business size standards in a way that would make more than 114,000 additional companies eligible for federal small business contracts. The comment period closes September 21 — meaning the window to weigh in is essentially now.
What This Actually Means
Federal contracting is one of the most overlooked revenue streams in small business. The U.S. government spends roughly $700 billion a year on contracts, and a chunk of that is legally set aside for small businesses. The problem: the SBA’s “size standards” — the definitions that determine who qualifies as a small business — haven’t kept pace with inflation or industry reality. A company that would have been a small business in 2015 might technically be classified as mid-market today just because revenue grew with inflation, even if the team size and operational profile didn’t change.
The proposed rule fixes that. The SBA is raising both employee-based and revenue-based thresholds significantly. It’s also restructuring the NAICS code classification system — the framework the government uses to categorize industries — from nearly 1,000 categories down to 338 broader groupings. The goal: reduce complexity and make it easier for actual small businesses to know where they stand and compete.
SBA Administrator Kelly Loeffler framed it plainly: “This proposal ensures that these job creators have the regulatory certainty to scale, expanding small business eligibility by 0.3%, or over 110,000 firms. By streamlining definitions, the SBA will expand access to capital, counseling, and contracting opportunities, which in turn create jobs and drive growth.”
There is one wrinkle worth knowing. Some government contracting experts have raised concerns that the SBA is compressing what is typically a multi-step review process into a single proposed rulemaking with only a 30-day comment window. The methodology update and the new size standards are being released simultaneously, rather than sequentially. That’s not necessarily a dealbreaker, but it means there’s more uncertainty than usual about how the final rule will look.
The Numbers Behind It
The scale here matters. According to the SBA, there are 33.2 million small businesses in the United States, and federal contracting is one of the most direct channels for predictable B2G revenue. Yet the vast majority of small businesses have never pursued a federal contract, in large part because the qualification process feels opaque and inaccessible.
Of the 338 new proposed industry groupings, 86 would shift from revenue-based to employee-based size standards — a meaningful change for service-oriented businesses that run lean teams but generate solid top-line revenue. That shift alone could flip eligibility for thousands of firms in consulting, IT services, and professional services.
According to the Bureau of Labor Statistics, self-employment in technical services grew 14% between 2023 and 2025 — exactly the category most likely to benefit from an employee-based size threshold. If you’re running a small but high-revenue services shop, this rule change could be the thing that finally gets you on the federal radar.
The Hustler’s Library Take
Federal contracting gets slept on because the barrier to entry feels bureaucratic and slow. That reputation isn’t entirely wrong. But the actual opportunity is real: multi-year contracts, predictable cash flow, and a customer base (the federal government) that reliably pays its invoices. If your business provides professional services, IT, logistics, facilities management, or consulting of any kind, you should be looking at this.
The SBA’s proposed changes don’t automatically get you a contract. But they do remove one of the more frustrating structural obstacles: being technically too big to qualify as a “small business” even when you’re clearly operating like one. For businesses that have been sitting just above the size threshold, this is a potential re-entry point.
The urgency here is real. Comments on this rule close September 21. If you have a stake in how these standards shake out — especially around the NAICS restructuring or the shift to employee-based thresholds — this is your one shot to put that on record before the rule gets finalized. Go to the Federal Register and submit your comment.
What You Should Do
1. Check your new eligibility now. The SBA’s updated size standards will increase both revenue and employee-based thresholds. Use the SBA’s size standards tool to see where you fall under the proposed new guidelines. If you’re in a category shifting from revenue-based to employee-based, run those numbers immediately.
2. Get registered on SAM.gov if you aren’t already. Federal contracting requires registration in the System for Award Management. It’s free, it takes time to process, and you need it done before you can bid on anything. Don’t wait until the rule is finalized to start this step. The same proactive mindset that helped gig workers claim their federal retirement match applies here: get set up before most people even know the door opened.
3. Submit a comment before September 21. The SBA is specifically asking for input on six questions related to methodology. You don’t need to be a policy expert. If you run a business in one of the affected NAICS categories, your real-world perspective on how these standards affect your ability to compete is exactly what they’re asking for. Substantive comments from actual operators carry weight.
If you’re not thinking about federal contracts as part of your revenue mix, you’re leaving a meaningful channel unexplored. Negotiating better deals starts with knowing where the deals are — and the federal government is the largest single buyer in the U.S. economy. The SBA just made it easier to get a seat at that table.
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