For SBA lenders
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.
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.
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.
Insider move
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.
13 CFR Part 121 - Small Business Size Regulations
SOP 50 10 - Lender and Development Company Loan Programs
SBA Table of Size Standards
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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