Business representatives gathered at a hearing in San Francisco Tuesday to figure out the best way to define the size of a small business.

Some argued that 500 should be the maximum number of employees a company could have in order to be considered a small business, while others insisted that 100 be the cutoff.

Some urged that the employee count be thrown out altogether in favor of revenue as a criterion.

Tuesday's hearing was one of 11 being hosted across the country by the U. S. Small Business Administration.

It wants to collect comments from small businesses so that it can tinker with its own definition of a small business. The SBA uses the definition to determine which businesses qualify for its loan programs.

Standards vary by industry

The SBA's size standards traditionally vary by industry, with 37 standards covering more than 1,000 industries.

It tried to change its definition last year but scrapped the effort after generating too much controversy.

On Tuesday, some took issue with the SBA's restrictions on the grants it gives small businesses for research and development under the Small Business Innovation Research program.

The SBA program disqualifies companies that are majority-owned by venture capital firms.

However, several representatives from the biotechnology industry said it is impossible for companies like theirs to develop new drugs without venture capital.

Ross Barrons, controller for ChemoCentryx, a biotech company in Mountain View, said that even though it has only 50 employees, it does not qualify as a small business because it receives venture capital.

Biotech relies on VCs

In biotechnology, you're looking at eight to 10 years and $800 million to develop a new drug," Barrons said. "You have to go to the VCs."

Others used Tuesday's hearing to sound off against the SBA for allowing big businesses to secure government contracts that are meant for small businesses.

A handful of protesters marched to that theme outside the SBA's offices on Market Street, chanting, "The SBA is stealing money from business."

Lloyd Chapman, founder of the American Small Business League, who has uncovered instances where big businesses like Raytheon Co. have received contracts under the guise of a small business, criticized the SBA for not cracking down.

"Who was representing small businesses when they allowed some of the biggest companies on the planet to win contracts?" Chapman said at the hearing.

Record-keeping problem

Gary Jackson, assistant administrator for SBA's office of size standards, said the issue is mainly a record-keeping problem.

Some small businesses receive government contracts and manage to keep them even after they've grown outgrown the SBA's size standard.

The SBA is considering a proposal to recertify companies annually so that they meet its definition from year to year.