The Trump administration is preparing a sweeping rewrite of what the federal government considers a small business, potentially delivering an enormous gift to private equity and venture capital groups. Former federal officials, procurement experts, and corporate law firms expect the proposal to accelerate buyouts and bailouts across the economy.

The change targets the Small Business Administration, an agency that guarantees loans, lowers risk for private lenders, and certifies companies for federal contracting preferences. Federal rules require 23% of contracting to go to small businesses each year, making the designation especially valuable.

The SBA also provides disaster relief and licenses private investment vehicles whose portfolios consist exclusively of small businesses. During the COVID-19 pandemic, it distributed more than $1 trillion despite concerns about mismanagement and fraud that proved largely accurate.

The administration has proposed cutting the agency’s budget by almost 75%. Yet its new rule could expand access to SBA programs for businesses with thousands of employees, hundreds of millions of dollars in revenue, and, in some cases, as much as $5 billion in assets.

Hundreds of actual small businesses have publicly opposed the measure. They fear that companies far larger than anything reasonably described as small will gain access to preferred loans, federal contracts, and other limited resources intended for independent firms.

The proposed thresholds are striking. The annual revenue cap for charter bus companies would rise from $19 million to $81 million, while the cap for businesses focused on soil preparation, planting, and cultivating would jump from $9.5 million to $624 million.

Marine cargo handling firms could qualify with annual revenue as high as $671 million, compared with the current maximum of $47 million. In other industries, the agency would increase employee limits twofold or threefold or replace revenue limits with employee counts.

Dairy farms currently qualify if they report less than $2.5 million in revenue. Under the proposal, they could generate any amount of revenue while retaining small business status, provided they have fewer than 3,000 employees.

Real estate investment companies would receive similar treatment, as would commercial construction, engineering, energy, and mining firms. Many of those industries are positioned to supply labor, power, and critical minerals for highly lucrative data center construction serving companies including Google, Amazon, and Meta.

The SBA and Department of Labor have introduced apprenticeship programs focused on training workers to construct data centers and other infrastructure for AI companies. One effort was announced at an expo alongside Sam Altman’s OpenAI, with the agency saying it would “promot[e] capital and contracting opportunities for domestic producers.”

Genuinely small companies fear being forced to compete against much larger businesses for scarce federal assistance. Some already receive regular buyout offers and say the added pressure could leave them with fewer ways to survive independently.

“Not a week goes by where a private equity firm doesn’t reach out and ask if I want to sell the company, and I don’t know any other small to medium-sized engineering firm that doesn’t have the exact same thing,” said Suzanne Unger Young, who runs North Carolina–based Three Oaks Engineering and has around 70 employees.

Corporate law firms Holland & Knight and McDermott Will & Schulte have alerted private equity clients to opportunities created by the proposal. Holland & Knight attorneys said dramatically larger revenue and company size limits could make it easier to merge companies or add businesses to investment portfolios without losing small business benefits.

The rule could also encourage private equity firms to establish SBA licensed investment vehicles carrying hundreds of millions of dollars in federal matching funds. Portfolio companies could win major government contracts, continue growing beneath the expanded limits, and potentially reach “higher valuations at exit.”

Former SBA associate administrator John Shoraka warned that the proposal could unleash consolidation. “You might see a lot of mergers and acquisition, and a lot of private equity play, especially with innovative companies and technology, especially with the push with DoW [Department of War] defense and technology and cyber and drone,” Shoraka said.

The SBA has signed agreements with the Department of War, Department of Energy, and NASA to direct federal money into investments made with private capital. Those efforts cover weapons, mineral supply chains, and energy infrastructure, which an SBA spokesperson called “essential to restoring American industrial dominance and national security.”

The agency projects the expanded definition would add about 100,000 eligible businesses, an increase of less than 2%. Roughly one third of those companies are already federal contractors that held more than $70 billion in contracts last year, potentially intensifying competition for businesses that are genuinely small.

The SBA will draft a final rule after a fast tracked 30 day public comment period ending September 21. With revenue limits rising by 2, 10, or even 65 times, the proposal threatens to turn programs built for small businesses into another lucrative feeding ground for private capital.