Federal Small Business Administration Revises Loan Eligibility Rules
The U.S. Small Business Administration (SBA) has issued a new policy, effective March 1, 2026, that fundamentally alters eligibility criteria for businesses seeking SBA-backed financing. Under the revised policy notice, businesses with any ownership stake held by legal permanent residents (LPRs), commonly known as green card holders, will no longer qualify for SBA loan programs unless already approved prior to March 1.
The rule mandates that 100 % of the direct and indirect owners of a loan applicant must be U.S. citizens or U.S. nationals who reside in the United States or its territories. Any business with even a minority ownership interest held by a green card holder will be ineligible for new SBA loans under this standard.
Affected SBA Loan Programs
The policy applies across the SBA’s primary lending channels, including:
- 7(a) loans, which provide general business financing for working capital, equipment, inventory, and other purposes.
- 504 loans, focused on commercial real estate and major fixed assets.
Under prior eligibility rules, businesses could qualify for SBA loan support with mixed ownership, provided a majority (typically at least 51 %) was held by U.S. citizens or LPRs. That framework has now been rescinded entirely, eliminating all LPR ownership participation for new loans after March 1.
Impact on Business Owners and Financing Deals
Industry lenders and business advocates have characterized the change as abrupt and potentially disruptive to ongoing financing arrangements. Lenders report that a significant share of SBA loans they process include green card holder ownership, and these parties may face constrained financing alternatives or the need to restructure ownership rapidly.
Frank Gallegos, executive director of a California nonprofit that facilitates SBA 504 loans, noted that affected borrowers will struggle to complete ownership restructuring before the March deadline, and conventional financing options generally require higher down payments and stricter terms.
Congressional Response and Policy Criticism
The policy shift has drawn political pushback from Congressional Democrats, including Senate Small Business Committee Ranking Member Edward Markey (D-Mass.) and House Small Business Committee Ranking Member Nydia Velázquez (D-N.Y.). In a joint statement, the lawmakers criticized the SBA change as contrary to the agency’s mission of supporting small business growth and an unwarranted barrier to immigrant entrepreneurs.
This recent policy revision follows a brief prior adjustment in December 2025, when the SBA had proposed allowing limited foreign ownership (up to 5 %) in certain cases. That proposal was subsequently reversed in favor of the current stricter approach.
Deadline and Transitional Measures
Businesses with green card holders currently involved in SBA loan processes must secure an SBA loan number before March 1, 2026 to retain eligibility under the existing rules. Loans that have not been fully processed and assigned a loan number by that date will be evaluated under the new criteria and are likely to be denied if any LPR ownership exists.
Broader Economic and Immigration Context
Supporters of the policy argue it aligns with government priorities emphasizing U.S. citizen and national ownership in federally backed financing. Critics contend it undermines immigrant contributions to entrepreneurship and economic growth, a segment historically responsible for a substantial portion of new business formation in the United States.
Advocates for small businesses suggest that green card holders have been significant drivers of local employment and investment, particularly in immigrant-rich regions, and that restricting access to SBA capital may exacerbate disparities in financing opportunities.
What This Means Going Forward
Effective March 1, 2026:
- Green card holders cannot hold any ownership interest in businesses receiving SBA-backed loans.
- 100 % U.S. citizen or U.S. national ownership is required for new SBA loans.
- Affected borrowers must either complete loan applications before the deadline or seek alternative financing options.
The full implications of the rule change will depend on how lenders adjust underwriting practices and how affected business owners adapt their ownership structures. Some experts anticipate increased demand for conventional loans and private financing among immigrant-owned enterprises that can no longer access SBA support.
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