When the clock strikes midnighton Sunday, July 13, thousands of relatively large companies will — poof —suddenly become small businesses.

It's not magic. It's just thefederal government at work.

The Small Business Administration has announced plans to updatethe size standards used to determine which firms are eligible for the federalgovernment's small-business lending and contracting programs. Coming on theheels of series of tweaks to individual industries over the past few years,this will be the first broad update based on inflation the department has madesince 2008.

In some industries, the cutoff is measured in total number of employees. Inothers, it is measured in terms of a company's total assets or annual revenue.In this case, the updates will apply to nearly 500 sectors for which sales orassets are the standard.

Under the new caps, which takeeffect July 14, the agency estimates that roughly 8,500 additional companieswill be considered a small business by the federal government.

Others might not consider themthat way.

For example, after the update,a travel agency or a locksmith would qualify as small if they have annualrevenues of less than $20.5 million, up from $19 million. A family clothingstore or software publisher, meanwhile, could soon bring in up to $38.5 milliona year and still apply for small business support.

This sweeping update comesafter the agency has made a number of smaller changes to various sectors;namely those for which the department instead uses employee count to determineeligibility. As a result, certain sectors, like telecommunications and airtravel, now have a small-business threshold of 1,500 workers.

In a recent column, Chuck Blakerman, an author and entrepreneur,called those size limits "absurd" and described the past five years as "thelargest expansion of the definition of 'small' in the 61-year history of theSBA."

"Their small isn't our small,"he added.

Members of Congress have takensimilar issue with the agency's perceived expansion of the type and size ofbusiness the agency supports. In multiple hearings before the House SmallBusiness Committee, the agency has been criticized for what some lawmakers worry is a shiftaway from helping mom-and-pop businesses to instead support mid-sized firms.

But the agency hasn't backeddown, insisting, in part, that companies in certain sectors have to competewith multibillion-dollar corporations. In that case, a company with merely tensof millions of dollars in sales warrants small-business support.

In addition, SBA officialsargue in the text of the rule that the changes will allow some firms that havelost access to contract set-asides or loan programs due to inflation toregain their status. Others that are about to eclipse the limit for theirindustry will also be able continue taking advantage of those programs.

Moreover, the agency added,"federal agencies will have a larger pool of small businesses from which todraw for their small business procurement programs." Heightened competition,they say, will help drive down prices and lead to a better return fortaxpayers.

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