CHAPTER 4
The Local Imperative
Leveling the Playing Field
Before we meet the innovators (and a couple of old standbys) who are creating new models for local investing, it is useful to take a closer look at what types of small businesses we are talking about and why supporting them is so important to our prosperity and well-being. Defining what exactly constitutes a small business can be tricky—and ripe for manipulation.
The Small Business Administration (SBA) defines a small business as a concern that is “organized for profit; has a place of business in the United States; makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor; is independently owned and operated; is not dominant in its field, on a national basis; and is no larger than SBA’s small business size standard for its industry.”1
A definition that only a bureaucrat could love.
Generally, the size cutoff is 500 employees. But employee headcount can be misleading. A hedge fund, for example, may have three employees but rake in a half a billion dollars. So, in addition to employee headcount, the SBA also sets revenue thresholds by industry—less than $750,000 for agriculture, for example, and less than $33.5 million for building and construction—but a general rule of thumb is $7 million or less in average annual receipts for nonmanufacturing industries. These parameters are used to determine eligibility for small business loans and government procurement ...
