The Small Business Administration is seeking to vastly expand the definition of small businesses, aiming to give much larger companies access to government contracts, loans and other assistance. The proposal, which the Trump administration says would allow businesses to continue to benefit from the agency’s programs as they grow, amounts to a sweeping overhaul of standards that have changed little in decades.

Many business owners support some increase in the limits on revenue and employees that determine what qualifies as a small business. But the scale of the proposed increase would also place small businesses in direct competition with significantly larger rivals for contracts and loans, raising alarms that the agency could hamstring the very businesses it was created to help. In some industries, such as financial investment services, companies could earn up to $1 billion or employ more than 3,000 people, more than some publicly traded corporations. The highest current cap for most industries is annual revenue of up to $47 million or fewer than 1,500 employees.

“I don’t feel like this change was made with small business in mind,” said Angela Dingle, the president and chief executive of Women Impacting Public Policy, a group that promotes women entrepreneurs. Caitlin O’Dea, a spokeswoman for the Small Business Administration, said the changes “would reward growth, strengthen domestic production and rebuild key supply chains — which is essential to restoring American industrial dominance and national security.”

The agency is soliciting public comments through Sept. 21, which Ms. O’Dea said it would review before issuing a final rule. By law, 23 percent of federal contracting dollars are supposed to go to business designated as “small.” The measure differs by industry. Last year, the federal government exceeded that goal, awarding nearly $273 billion to qualifying businesses. Under the proposed rule, which was released on Thursday, the administration is aiming to substantially increase the revenue and employees that companies can have while retaining small business status. For example, the revenue limit for a business in the engineering services industry would increase to $252 million a year, from $25.5 million. Casinos could earn as much as $744 million, more than 20 times the current cap of $34 million.

“These are the biggest size standard changes in history, no question in my mind about that,” said Sam Le, who was the director of policy, planning and liaison at the Small Business Administration from 2020 to 2025. He said smaller businesses would have more competition for federal contracts and have fewer opportunities for subcontracts. Larger companies that would have had to share some of the work with smaller competitors would qualify as small businesses to take on the work alone. The agency said in its proposal that the modified size standards would increase the number of businesses classified as small by roughly 114,500. According to the Census Bureau, nearly 90 percent of American businesses have fewer than 20 employees. Nearly a third of those newly eligible companies already accounted for federal contracts worth $71 billion in fiscal year 2025, according to the Small Business Administration. Sen. Edward Markey of Massachusetts, the ranking Democrat on the Small Business Committee, said the change would “decimate opportunities for actual small businesses.”

Madison Services Group, a lobbying firm that represents contractors in industries such as construction and information technology, has been pushing for a substantial increase in the size standards for several years, because as federal contract awards have grown, it has become harder to win bids while staying under the limits. But for some categories, the proposal is much higher than what they had asked for. “People are trying to figure out, what’s the right number to comment on that would allow for growth, but not put them into a category where they can no longer compete,” s...