You probably know this already—from what we can tell word is spreading like wildfire—but Monday (Dec. 17, 2018) the president signed the “Small Business Runway Extension Act of 2018” into law.
This changes the period of time the U.S. Small Business Administration uses to measure a business’s size in revenue-based size standards from three years to five years. The law doesn’t say that there will be a period of implementation, so it’s reasonably safe to assume the effect is immediate.
While this may be a seemingly innocuous change, anecdotally, we can tell you that reactions have varied from rapturous delight to utter horror.
Though the goal of the law is to benefit growing businesses by helping them stay small for a longer period of time, it also has the unintended effect that some businesses that were small when this week began, are suddenly “large” today.
As my Managing Partner Steve Koprince noted yesterday, in a post published just a few hours before the rule became law, a company that has had declining revenues over a five-year stretch could easily be small under the three-year classification and large under the five. Talk about a bad beat.
But, as Steve suggested, there’s an easy way to fix this problem, Congress should simply pass another bill that allows the SBA to use either formula, whichever results in the business being small.
Hopefully, such a bill is already in the works.
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