{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-is-required-for-a-business-to-be-considered-small-under-the-al","api_url":"https://dealroom.so/api/public/questions/what-specific-documentation-is-required-for-a-business-to-be-considered-small-under-the-al","question":"What specific documentation is required for a business to be considered 'small' under the alternative size standard?","topic":"Affiliation & size","audience":"lender","bot_mode":"lender","short_answer":"To qualify under the alternative size standard, the business must provide its average tangible net worth and average net income for the two fiscal years prior to the application date.","rule":"The SBA's alternative size standard allows businesses that exceed the industry-specific size standards (based on NAICS codes) to qualify if they have a tangible net worth of no more than $15 million and average net income after federal income taxes (excluding carry-over losses) of no more than $5 million for the two full fiscal years before the application date.","example":"A manufacturing business has annual revenues exceeding its NAICS code size standard. The lender collects the business's last two years of audited financial statements, specifically checking the balance sheet for tangible net worth and the income statement for net income after tax, to confirm it meets the $15M and $5M thresholds.","what_lenders_check":"Lenders must obtain accurate, preferably audited or reviewed, financial statements to verify both tangible net worth and average net income. Ensuring correct calculation of 'tangible' net worth and proper handling of carry-over losses is crucial for eligibility.","required_facts":["Alternative size standard","Tangible net worth","Average net income","Two fiscal years","Financial statements"],"source_families":["13 CFR Part 121 - Small Business Size Regulations","SOP 50 10 - Lender and Development Company Loan Programs","SBA Table of Size Standards"],"official_sources":[{"title":"13 CFR Part 121 - Small Business Size Regulations","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-121"},{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"SBA Table of Size Standards","url":"https://www.sba.gov/document/support-table-size-standards"}],"related_questions":[{"question":"When does a contractual relationship between two businesses trigger affiliation for size standard calculations?","url":"https://dealroom.so/for-lenders/questions/when-does-a-contractual-relationship-between-two-businesses-trigger-affiliation-for-size-s"},{"question":"How does ownership of options or warrants affect affiliation determination for SBA size standards?","url":"https://dealroom.so/for-lenders/questions/how-does-ownership-of-options-or-warrants-affect-affiliation-determination-for-sba-size-st"},{"question":"What are the size standard requirements for a business applying for a 7(a) loan if it operates internationally?","url":"https://dealroom.so/for-lenders/questions/what-are-the-size-standard-requirements-for-a-business-applying-for-a-7-a-loan-if-it-opera"},{"question":"What specific scenarios involving shared directors, officers, or key employees constitute 'common management' triggering affiliation for SBA size determination?","url":"https://dealroom.so/for-lenders/questions/what-specific-scenarios-involving-shared-directors-officers-or-key-employees-constitute-co"},{"question":"Under what conditions does a shared economic interest trigger affiliation for SBA size standard purposes?","url":"https://dealroom.so/for-lenders/questions/under-what-conditions-does-a-shared-economic-interest-trigger-affiliation-for-sba-size-sta"},{"question":"How does the 'totality of the circumstances' rule apply when determining affiliation for SBA size standards?","url":"https://dealroom.so/for-lenders/questions/how-does-the-totality-of-the-circumstances-rule-apply-when-determining-affiliation-for-sba"}],"related_terms":[{"term":"Small Business Size Standards","url":"https://dealroom.so/glossary/small-business-size-standards"},{"term":"Small business size standard","url":"https://dealroom.so/glossary/small-business-size-standard"},{"term":"For-profit small business","url":"https://dealroom.so/glossary/for-profit-small-business"},{"term":"Alternative size standard","url":"https://dealroom.so/glossary/alternative-size-standard"},{"term":"Industry-Specific Size Standards","url":"https://dealroom.so/glossary/industry-specific-size-standards"},{"term":"Small business","url":"https://dealroom.so/glossary/small-business"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/what-specific-documentation-is-required-for-a-business-to-be-considered-small-under-the-al","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}