# Your $12.4M restaurant group makes your food truck "too big" for SBA. Run the second test. > A founder's other restaurant pushed a brand-new food truck over SBA's size standard. Here is how affiliation works under SOP 50 10 8.1, and the second size test most founders never run. By Jordan Menlo · Published October 22, 2026 Section: Business Funding › SBA & Government-Backed · Series: SBA 7(a) Playbook (https://mcafax.com/notebook/category/sba) Canonical: https://mcafax.com/notebook/sba-7a-affiliation-size-standard Source: MCAFax, The Broker's Notebook (https://mcafax.com/notebook). MCAFax is not a lender or a law firm. --- "You're not small." That's what Kai (a made-up founder) heard from a lender about a $250,000 SBA 7(a) loan for a brand-new food truck with zero dollars in sales. The problem was the restaurant company Kai already owned 60% of. This is general information, not legal or financial advice. Confirm every rule with your lender and the current SOP before you apply. ## The one tip Under SBA SOP 50 10 8.1 (effective October 1, 2026), your business has to be small, and "small" counts your affiliates. There are two ways to pass, and you only need one. Test one is the industry size standard. Your business alone has to fit the standard for its industry. Then your business plus its affiliates has to fit the standard for either your primary industry or the combined group's primary industry, whichever is higher. Most standards in 13 CFR 121.201 are average annual receipts from federal tax returns. Test two is the alternative size standard. Your business, including affiliates, passes if tangible net worth is no more than $20 million and average net income after federal income taxes (excluding carry-over losses) for the last 2 full fiscal years is no more than $6.5 million. Who counts as an affiliate? Under the ownership rules in the SOP: - If you own more than 50% of the applicant and more than 50% of another business in the same 3-digit NAICS subsector, they're affiliated. - If nobody owns more than 50% of the applicant, a 20%+ owner's other business can be affiliated if the owner holds more than 50% of it and it's in the same 3-digit subsector. - Your spouse's and minor children's stakes in the same business get added to yours. - Options, convertible notes, and agreements to merge count as if they already happened. ## Worked example Kai owns 100% of the food truck LLC (NAICS 722330, Mobile Food Services, with a $9.0 million size standard). Kai also owns 60% of Brindlewick Kitchen (a made-up restaurant company), a full-service operation (NAICS 722511, $11.5 million standard). Both codes sit in subsector 722, and Kai owns more than 50% of each, so they're affiliated. Brindlewick's receipts have run about $12.4 million a year. Combined with the truck, that's $12.4 million against the higher standard, $11.5 million for the group's primary industry. Test one fails by $900,000. Now test two. Brindlewick's tangible net worth is $3.1 million and the truck adds about $40,000, so roughly $3.14 million against the $20 million cap. After-tax net income averaged $610,000 over the last 2 full fiscal years against the $6.5 million cap. Test two passes, so the truck can still be eligible. Kai almost tried selling down the restaurant stake instead. The SOP says SBA won't give weight to your ability to divest to avoid affiliation. ## Do this week - List every business where you, your spouse, or your minor kids own 20% or more. Write each one's 6-digit NAICS code next to it. - Circle any that share the first 3 digits with the business you're financing. - Look up each code's standard in 13 CFR 121.201 and add up the circled businesses' receipts from their tax returns. - If you're over, pull last year's and the prior year's balance sheets and after-tax net income and run the alternative test. - Tell your lender which test you pass, with the numbers, before they find the affiliate themselves. - Buying a business? The SOP says the combined size of you and the business you're acquiring has to fit. Being "too big" on one test isn't a no. Run the other test before you restructure anything. More in the SBA 7(a) Playbook: [all SBA guides](https://mcafax.com/notebook/category/sba) ## Sources - SBA SOP 50 10 8.1, Section A, Ch. 1 (size standards, affiliation, when size is determined): [SBA.gov](https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs) - Size standards table, 13 CFR 121.201: [eCFR](https://www.ecfr.gov/current/title-13/section-121.201) - Alternative size standard, 13 CFR 121.301: [eCFR](https://www.ecfr.gov/current/title-13/section-121.301) - SBA size standards overview: [SBA.gov](https://www.sba.gov/federal-contracting/contracting-guide/size-standards) Verified against SOP 50 10 8.1 text: October 23, 2026. ## Questions readers ask **Does SBA count my other businesses when deciding if I'm small?** It can. SBA SOP 50 10 8.1 counts affiliates. If you own more than 50% of the applicant and more than 50% of another business in the same 3-digit NAICS subsector, the two are affiliated and their size is combined. **What is the SBA alternative size standard?** A second way to qualify as small for 7(a) and 504 loans. The applicant, including affiliates, must have tangible net worth of $20 million or less and average after-tax net income of $6.5 million or less for the 2 full fiscal years before applying. **If I fail the industry size standard, can I still get a 7(a) loan?** Yes, if you pass the alternative size standard. The SOP says an applicant may qualify under either the industry size standard or the alternative size standard. **Does my spouse's business count toward my size?** Spouse and minor-child ownership in the same business is combined with yours. Under the SOP, interests are not combined when you and your spouse each own stakes in different businesses. **When is my business's size measured?** For non-delegated loans, as of the date SBA accepts the application. For loans a PLP or SBA Express lender approves under its delegated authority, as of the date the lender approves the loan.