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SBA Proposes Overhaul to Small Business Classification & What It Means for Electrical Contractors

The Small Business Administration is proposing one of the most significant changes to small business classification in years, and it could reshape which electrical contractors qualify for small business status and the benefits that come with it.

Right now, electrical and wiring contractors qualify as a small business based on revenue, specifically, average annual gross receipts under $19 million over the past five years. SBA only adjusts that number for inflation every five years, with the last update in 2023.

Under the proposal announced August 20th, SBA would scrap the revenue-based model for electrical contractors entirely and switch to an employee-count model instead. Contractors with fewer than 550 employees would qualify as a small business, with no revenue limit at all. SBA estimates this shift would allow more than 1,800 additional electrical and wiring installation contractors nationwide to qualify.

Qualifying as a small business isn't just a label; it comes with real, tangible advantages, especially for contractors who do federal or government-funded work:

• Set-aside contracts: All federal contracts under $350,000 are automatically reserved for small businesses.
• The "Rule of Two": If at least two SBA-registered small businesses can complete a job at market rate, the contracting office is required to award it to one of them - regardless of the contract's total size.
• Government-wide contracting goals: 23% of all federal contract dollars are targeted toward small businesses, and this goal is closely tracked by Congress and federal agencies.
• Subcontracting opportunities: On large federal contracts, prime contractors are required to submit small business subcontracting plans, opening doors for small businesses even when they aren't the prime awardee.
• Access to resources: Small business designation also unlocks SBA-backed loan guarantees (often at better rates than conventional financing), disaster assistance loans and grants, and free business counseling and training — plus certification pathways for women- and veteran-owned businesses.

The public comment period is open through September 21, 2026. NECA will be compiling feedback from contractors, chapters, staff, and industry partners to submit on the industry's behalf. If you have thoughts or questions, contact NECA before the deadline.

SBA could issue a final ruling as soon as late November, though because this proposal affects industries across the country, the review and feedback process could push that timeline back.

Representatives from the SBA's Rocky Mountain Regional Office will be presenting on the proposal at the NECA Convention in Las Vegas the morning of Tuesday, October 6th, covering available resources, how to engage with your local SBA office, and what this expansion could mean for your business. They'll also be on hand to answer questions.