For SBA lenders
Short answer
Under the alternative size standard, a business qualifies as 'small' if its tangible net worth is not more than $15 million AND its average net income after federal income taxes (excluding carry-over losses) for the two preceding fiscal years is not more than $5 million.
The SBA's alternative size standard provides an additional pathway for businesses to qualify as 'small' if they do not meet the industry-specific NAICS code size standard. This standard focuses on financial metrics rather than employee count or revenue, allowing some businesses with higher revenue but limited net worth or profitability to be eligible for SBA programs.
A construction company has annual revenue of $40 million, exceeding its NAICS code size standard of $38 million. However, its tangible net worth is $10 million (below $15M) and its average net income for the past two years is $3 million (below $5M). This company qualifies as 'small' under the alternative size standard.
Insider move
Lenders must accurately calculate tangible net worth and average net income, including ensuring proper exclusions for carry-over losses. Miscalculating these figures can lead to an ineligible borrower, which would jeopardize the SBA guaranty.
13 CFR Part 121 - Small Business Size Regulations
SBA Table of Size Standards
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
More on affiliation & size
Terms in this answer
Pre-qualify your SBA 7(a) deal
Tell us the business, the price, and where you are — we'll point you to the lenders most likely to fund a deal like yours and flag anything that trips up approval.
Free · No documents · Usually same-day