(a) For Business Loans and Disaster Loans (other than physical disaster loans), an applicant must not exceed the size standard for the industry in which:
(1) The applicant combined with its affiliates is primarily engaged; and
(2) The applicant alone is primarily engaged.
(b) For Development Company programs, an applicant must meet one of the following standards:
(1) The same standards applicable under paragraph (a) of this section; or
(2) Including its affiliates, tangible net worth not in excess of $7 million, and average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $2.5 million. If the applicant is not required by law to pay Federal income taxes at the enterprise level, but is required to pass income through to its shareholders, partners, beneficiaries, or other equitable owners, the applicant's "net income after Federal income taxes" will be its net income reduced by an amount computed as follows:
(i) If the applicant is not required by law to pay State (and local, if any) income taxes at the enterprise level, multiply its net income by the marginal State income tax rate (or by the combined State and local income tax rates, as applicable) that would have applied if it were a taxable corporation.
(ii) Multiply the applicant's net income, less any deduction for State and local income taxes calculated under paragraph (b)(2)(i) of this section, by the marginal Federal income tax rate that would have applied if the applicant were a taxable corporation.
(iii) Sum the results obtained in paragraphs (b)(2)(i) and (b)(2)(ii) of this section.
(c) For the Small Business Investment Company (SBIC) program, an applicant must meet one of the following standards:
(1) The same standards applicable under paragraph (a) of this section; or
(2) Including its affiliates, tangible net worth not in excess of $18 million, and average net income after Federal income taxes (excluding any carry-over losses) for the preceding two completed fiscal years not in excess of $6 million. If the applicant is not required by law to pay Federal income taxes at the enterprise level, but is required to pass income through to its shareholders, partners, beneficiaries, or other equitable owners, the applicant's "net income after Federal income taxes" will be its net income reduced by an amount computed as follows:
(i) If the applicant is not required by law to pay State (and local, if any) income taxes at the enterprise level, multiply its net income by the marginal State income tax rate (or by the combined State and local income tax rates, as applicable) that would have applied if it were a taxable corporation.
(ii) Multiply the applicant's net income, less any deduction for State and local income taxes calculated under paragraph (c)(2)(i) of this section, by the marginal Federal income tax rate that would have applied if the applicant were a taxable corporation.
(iii) Add the results obtained in paragraphs (c)(2)(i) and (c)(2)(ii) of this section.
(d) For Surety Bond Guarantee assistance --
(1) Any construction (general or special trade) concern or concern performing a contract for services is small if its average annual receipts do not exceed $6.0 million.
(2) Any concern not specified in paragraph (d)(1) of this section must meet the size standard for the primary industry in which it, combined with its affiliates, is engaged.
(e) The applicable size standards for the purpose of all SBA financial assistance programs, excluding the Surety Bond Guarantee assistance program, are increased by 25 percent whenever the applicant agrees to use the assistance within a labor surplus area. Labor surplus areas are listed monthly in the Department of Labor publication called "Area Trends."
Source: Code of Federal Regulations, Title 13, Volume 1, Revised as of January 1, 2003, Part 121 - Small Business Size Regulations, Subpart A - Size Eligibility Provisions and Standards, Size Eligibility Requirements For SBA Financial Assistance
