How SBA Size Rule Changes Could Affect the Value of a Business in an M&A Deal
By Francisco E. Mundaca, Managing Partner, The Mundaca Law Firm · Published September 2, 2026 · Current as of September 2, 2026
If you are buying or selling a business, SBA size rule changes can affect M&A valuation when they change assumptions about future revenue.
One question matters greatly:
Will the revenue that supports the company’s value continue after the deal closes?
A proposed change from the U.S. Small Business Administration (SBA) could affect that question for some businesses.
On August 20, 2026, the SBA proposed changes to the standards used to determine which companies qualify as small businesses. The proposal would simplify nearly 1,000 industry categories into 338 and could result in more than 110,000 additional businesses being classified as small.
For some companies, that classification can influence future business opportunities and revenue. That makes the proposed change relevant when valuing, buying, or selling a business in a merger or acquisition.
This article focuses on the M&A implications for buyers and sellers.
Key Takeaways
- The SBA published its proposed overhaul of small-business size standards on August 20, 2026.
- The proposal would consolidate nearly 1,000 industry categories into 338 broader classifications.
- The SBA estimates that more than 110,000 additional businesses could qualify as small under the proposed standards.
- The proposal is not final, so buyers and sellers should treat its potential effect on future revenue as a due-diligence and valuation issue rather than an established outcome.
- When future revenue depends on a classification, contract, license, customer relationship, or other outside condition, that dependency can affect purchase-price assumptions and transaction structure.
Why Do SBA Size Rule Changes Matter When Buying a Business?
When evaluating an acquisition, past revenue is important. But the purchase price often depends heavily on what the buyer believes the company will earn in the future.
That makes the key question:
How much of the company’s future revenue can the buyer reasonably expect to continue after the acquisition?
If part of the company’s revenue depends on maintaining a particular business classification, changes after the acquisition could affect those assumptions.
The SBA’s proposed higher thresholds may give some businesses more room to grow or combine while remaining classified as small. But buyers should understand those assumptions before agreeing on a price.
What Should Buyers Review During M&A Due Diligence?
M&A due diligence should look beyond financial statements and historical revenue.
Buyers should understand:
- Where the company’s revenue comes from.
- How concentrated that revenue is.
- How much future growth depends on outside conditions or classifications.
- Whether those conditions could change after the acquisition.
- Whether the asking price assumes growth that may not happen.
The objective is simple:
Understand what you are actually buying—not just what the business earned in the past.
A company can have strong historical performance while still carrying uncertainty about future revenue. That uncertainty should be identified before closing.
How Can a Deal Address Future Revenue Risk?
Finding uncertainty does not necessarily mean walking away from a deal. Often, the transaction can be structured to address it.
Depending on the circumstances, buyers and sellers may consider:
- Adjusting the purchase price.
- Using an earn-out tied to future performance.
- Adding protections to the purchase agreement.
- Setting conditions that must be satisfied before closing.
For example, a seller may believe the business will continue growing rapidly, while the buyer sees more uncertainty. Instead of paying the entire purchase price based on that projection, the parties may agree that part of the price will be paid later if the business reaches specific performance goals.
Risk identified before closing can often be negotiated. Risk discovered after closing can become a dispute and, in some cases, business litigation.
What Should Sellers Prepare Before Going to Market?
The same issue matters when selling a business.
A seller should be prepared to explain:
- Where the company’s revenue comes from.
- Which revenue is recurring.
- What is driving future growth.
- What assumptions support the company’s valuation.
- Whether those assumptions could change after a sale.
The clearer the seller can make the business case, the easier it may be to respond to buyer concerns during due diligence and purchase-price negotiations.
What Could the SBA Proposal Mean for M&A Valuation?
The SBA proposal is not final, and the final rules may change.
But the broader M&A lesson is important today.
When part of a company’s value depends on a regulatory classification, customer relationship, major contract, license, or other outside condition, buyers and sellers should understand that dependency before setting the purchase price.
For some transactions affected by the SBA proposal, higher size thresholds could improve the outlook. But buyers should not pay for future revenue without understanding the assumptions behind it. And sellers should be prepared to support the future value they are asking buyers to pay for.
Considering Buying or Selling a Business?
The Mundaca Law Firm represents business owners, buyers, and sellers in mergers and acquisitions, business sales, M&A due diligence, transaction structuring, negotiations, and purchase agreements across Washington, D.C., Maryland, Virginia, Texas, and New York.
If you are considering buying or selling a business, schedule a consultation with an M&A attorney before signing a letter of intent or purchase agreement.
Frequently Asked Questions
In addition to financial performance, review where the company’s revenue comes from, how predictable it is, what risks could affect future revenue, and whether those risks are reflected in the purchase price.
Yes. Buyers and sellers may address uncertainty through the purchase price, earn-outs, or other terms in the purchase agreement.
Regulatory changes can matter when a business depends on a classification, license, contract, or other outside condition that contributes to its future revenue and value.
Sources
U.S. Small Business Administration, SBA Proposes Overhaul to Simplify Small Business Classification and Expand Access to Federal Programs, August 20, 2026.
Federal Register, Small Business Size Standards, Proposed Rule, 91 FR 53741, RIN 3245-AI67, August 20, 2026.
U.S. Small Business Administration Office of Advocacy, SBA Office of Advocacy announcement, August 20, 2026.