What is a small business?

A small and medium-sized enterprise (SME), also known as a small business (SME), is a private corporation, partnership, or sole proprietorship that meets revenue or employee criteria as defined by the U.S. Small Business Administration. According to the latest government data, there are more than 33 million small businesses in the United States, accounting for 99.9% of all U.S. businesses and employing nearly half of all private sector employees.^[0]

Small businesses are a key driver of the U.S. economy and have access to valuable resources such as contracts and grants, mentorship and training. small business loans.

The SBA guidelines for defining small businesses are used by most financial institutions in the United States and can generally be divided into two categories.

To be considered a small business, a company must:

• For-profit businesses of any legal structure.

• Independently owned and operated.

• It is not nationally dominant in that field.

• With certain exceptions, we are physically located and operated within the United States or its territories.

Small businesses wishing to contract with the government have additional requirements, including maintaining compliance with applicable laws and regulations and registering with the System for Awards Management (SAM), a database used by government agencies to find contractors. Basic requirements must be met.

The small business size standard is a number that reflects the maximum size of a business before it is no longer considered small. Two metrics are used to refer to size criteria: number of employees and average annual revenue. Generally, the SBA's definition of a small business is an independent business with fewer than 500 employees. However, the exact thresholds for each metric vary widely by industry.

If your business meets the general qualifications for a small business, the next step is to make sure it meets the size criteria.

The exact size criteria for a business is determined by how it is classified according to the North American Industry Classification System (NAICS). NAICS is a system used to classify companies for reporting economic data in the United States. NAICS codes are assigned by various government agencies based on the primary business activity, and may also be identified by business owners themselves. Although the purpose of NAICS codes is primarily data reporting, they are also used by various government agencies, regulatory commissions, industry associations, and even financial institutions.

To find your NAICS code, you can use the NAICS website's database, which can be searched based on keywords. You can also assign yourself multiple codes if you think your business operations fall outside the scope of his one classification.

Most industries use average annual revenue or a combination of revenue and employees to determine whether a company is small.of SBA size standard table We detail the exact thresholds for each industry and further break it down by NAICS code. Standards can vary widely between NAICS codes even within the same industry, so determining the correct code is important. You can also use SBA size standard tools Search by NAICS code.

For each common industry sector, you can expect to see size standards such as:

Businesses classified as small are an important part of the economy, but may struggle to compete with larger companies. To help with this, small businesses can access additional resources, including:

• loan. SBA loan Partially guaranteed by governments to encourage lenders to support small and medium-sized businesses, there are different types depending on how much capital a business needs and what it is for. In addition to SBA loans, Bank, online lender Nonprofit lenders also offer additional small business financing options, such as term loans, lines of credit, and equipment loans.

• Government contracts. The SBA ensures that a portion of all government contracting work goes to small businesses and also advises small businesses on winning government contracts. He also offers the SBA 8(a) program, which is a business development program. This allows members to access competitive government contracts and, in some cases, bypass the bidding process altogether.