SBA says legal permanent residents will be ineligible for its loan program, effective March 1

The Small Business Administration (SBA) announced that green card holders will be barred from applying for SBA loans beginning March 1, marking a significant shift in policy that affects immigrant entrepreneurs across the United States.

The policy change represents the latest move in the agency’s broader effort to restructure operations and tighten loan restrictions. Last year, the SBA had already increased ownership requirements for loan applicants, mandating that businesses be 100% owned by U.S. citizens, nationals, or lawful permanent residents, up from the previous threshold of 51%.

In December, the agency briefly appeared to soften its stance, issuing guidance that permitted up to 5% non-citizen ownership in businesses applying for loans. However, the new policy completely rescinds that allowance and goes further by excluding lawful permanent residents entirely.

“The Trump SBA is committed to driving economic growth and job creation for American citizens – which is why, effective March 1, the agency will no longer guarantee loans for small businesses owned by foreign nationals,” said SBA spokesperson Maggie Clemmons in a statement. “Across every program, the SBA is ensuring that every taxpayer dollar entrusted to this agency goes to support U.S. job creators and innovators.”

The SBA primarily functions as a loan guarantor rather than a direct lender, partnering with financial institutions to facilitate access to capital for small businesses. These government-backed loans typically offer more favorable terms than conventional financing options, including lower interest rates and longer repayment periods, making them particularly valuable for entrepreneurs with limited resources or credit history.

The only exception to the SBA’s indirect lending approach occurs during declared disasters, when the agency provides direct financial assistance to affected businesses.

The policy shift has drawn immediate criticism from advocacy organizations. The Small Business Majority, a national small business advocacy group, condemned the decision, arguing it would “limit the growth of small businesses and jobs throughout the United States.”

John Arensmeyer, CEO of Small Business Majority, highlighted the disproportionate impact the policy could have on business creation nationwide. “The latest decision by SBA fails to recognize that immigrants are twice as likely to start a business as native-born U.S. citizens,” Arensmeyer noted. “Given that reality, SBA’s severe restrictions will have a negative impact on small business creation throughout this country for years to come.”

The change comes at a time when immigrant entrepreneurs have been recognized as significant contributors to the American economy. According to research from the National Foundation for American Policy, immigrants have founded or co-founded nearly half of America’s Fortune 500 companies, collectively employing millions of workers.

Small business experts worry that restricting access to capital for green card holders could drive talented entrepreneurs to other countries with more welcoming policies. The timing is particularly challenging as many small businesses continue to navigate post-pandemic recovery and face pressures from inflation and rising operating costs.

For green card holders currently in the loan application process, the impending deadline creates additional urgency to secure financing before the March 1 cutoff. Financial advisors are recommending that affected business owners explore alternative funding sources, including community development financial institutions, private loans, or venture capital.

The policy change aligns with broader shifts in immigration and economic policy under the current administration, which has emphasized prioritizing American citizens in federal programs and initiatives.