Manufacturer Warns SBA Plan Would Reclassify 114,541 Firms as Small

A machine-shop owner argued against the Small Business Administration's proposed new size standards in a column published by RealClearMarkets, saying the change would let private investment funds acquire mid-sized manufacturers with federal credit support.

The agency proposed the rule on August 20. For cutting-tool manufacturers, the employee ceiling would rise from 500 to 1,800, the author wrote, calling headcount an outdated yardstick because automated equipment now runs overnight with minimal staffing.

By the SBA's own count, 114,541 larger companies would newly qualify as small and gain access to guaranteed loans and reserved federal contracts, the column said. Of those, 37,002 already hold federal work worth more than $71 billion.

The author, who said he has run his shop for 21 years, pointed to funds licensed by the SBA, whose borrowing the agency backs at up to two dollars for every dollar the fund puts in. Those funds may only buy companies the agency classifies as small, and their portfolio companies are not measured against the size of the fund that owns them. Ordinary SBA borrowers face a $10 million limit, while the licensed funds can draw up to $250 million.

He also cited defense capital-goods orders up 35% and a 50% rise in private-equity deals for precision manufacturers, and proposed measuring portfolio companies by the size of their owner.

This story was first reported by RealClearMarkets.