For SBA lenders
Short answer
Under the alternative size standard, a business is considered 'small' if its tangible net worth is not more than $15,000,000 and its average net income after federal income taxes for the preceding two years is not more than $5,000,000.
For businesses that do not meet the primary NAICS-based size standards, the SBA offers an alternative size standard. This dual test requires both the tangible net worth and the average net income (after federal income taxes, excluding any carryover losses) to be below specific thresholds for the two preceding fiscal years.
A manufacturing business has a tangible net worth of $14,000,000 and average net income of $4,500,000 over the past two years. While it might exceed its NAICS code's employee count standard, it would qualify as small under the alternative size standard for a 7(a) loan.
Insider move
Lenders must accurately calculate tangible net worth and average net income, ensuring all exclusions and definitions are correctly applied. This often requires reviewing audited financial statements and tax returns.
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.
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