How does SBA calculate annual receipts for its size standards?
Short answer
Receipts are generally total income plus cost of goods sold from your federal tax returns. You may average your last 3 or 5 completed fiscal years if you have been open 3 or more. Affiliates' receipts are added (13 CFR § 121.104).
SBA generally adds total income and cost of goods sold from your federal tax returns, then averages the result over 3 or 5 years. The rule is 13 CFR § 121.104. For a sole proprietorship, it is gross income plus cost of goods sold.
Averaging period for SBA loans
If you have been in business for three or more completed fiscal years, you may choose a 3-year or 5-year average (§ 121.104(c)(4)). With less than three, take total receipts for your time in business, divide by weeks in business and multiply by 52.
What comes out
Only the exclusions named in the regulation apply:
- Net capital gains or losses.
- Taxes collected for and remitted to a taxing authority, such as sales tax.
- Proceeds from transactions with domestic or foreign affiliates.
- Amounts collected for another by a travel agent, real estate agent, advertising agent, conference management provider, freight forwarder or customs broker.
Subcontractor costs, reimbursements and investment income cannot be excluded (§ 121.104(a)).
Affiliates and verification
Add each affiliate's average receipts to yours (§ 121.104(d)(1)). SOP 50 10 8.1, Sec. A, Ch. 1, Para. D says receipts are based on federal tax returns. Lenders verify them with IRS tax transcripts (Sec. A, Ch. 5, Para. B, p. 95). On SBA Express and Export Express loans, lenders still obtain transcripts to confirm filing and size (Para. B.4.g). They may skip reconciliation only if they do not use business financial information to decide credit.
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