US Small Business Administration Implements Strict Citizenship Requirement for Loan Access
The United States Small Business Administration (SBA) has unveiled a significant policy overhaul that will effectively prohibit businesses with legal permanent residents, commonly known as green card holders, from obtaining SBA-backed loans. This controversial decision has ignited fierce opposition from Democratic legislators who argue it undermines immigrant entrepreneurship and the American Dream.
Policy Changes Effective March 2026 with 100% Citizenship Mandate
In a formal policy notice released on February 2, the SBA announced that these sweeping changes will officially take effect starting March 1, 2026. The revised Standard Operating Procedure (SOP) 50 10 8 now mandates that 100% of all direct and indirect owners of any small business applying for SBA loans must be either US citizens or US nationals who maintain their principal residence within the United States, its territories, or possessions.
This policy update is specifically aligned with regulatory framework 13 C.F.R. 120.100 and Executive Order 14159, which carries the title "Protecting the American People Against Invasion." The alignment signals a deliberate shift toward stricter immigration-related business regulations.
Complete Exclusion of Legal Permanent Residents from Ownership
The new regulations explicitly declare that legal permanent residents (LPRs) are ineligible to hold any ownership stake—whether direct or indirect—in entities seeking SBA loans. This prohibition extends to the loan applicant itself, the operating company (OC), and any eligible passive company (EPC) involved in the transaction.
This represents a substantial tightening of previous guidelines, marking a departure from more flexible ownership structures that previously accommodated some foreign participation.
Elimination of Previous 5% Foreign Ownership Exception
Importantly, the SBA has rescinded Procedural Notice 5000-872050, which had previously allowed for up to 5% ownership by foreign nationals or by US citizens, nationals, or legal permanent residents residing outside the United States. This narrow exception, which provided some flexibility for international business connections, will no longer be applicable once the new policy takes effect in March 2026.
The complete removal of this provision underscores the administration's commitment to enforcing stricter citizenship requirements across all ownership levels.
Democratic Lawmakers Condemn SBA Decision as Discriminatory
Senator Edward J. Markey of Massachusetts and Representative Nydia Velázquez of New York, who serve as ranking members of the Senate and House Small Business Committees respectively, have strongly condemned the SBA's decision. In a joint statement, they accused the Trump administration of "stoking the flames of hatred" and creating fear among immigrant communities and small business owners.
"Rather than supporting hard-working legal immigrants who wish to start or expand their businesses, the Trump SBA is choosing hatred by barring green card holders from receiving SBA loans," the lawmakers stated. They further argued that the administration's message to immigrants is clear: "you are not welcome to pursue the American Dream."
Previous Warnings and Concerns Ignored by SBA
Democratic legislators noted that concerns regarding stricter citizenship verification requirements had been repeatedly raised with the SBA throughout 2024. In July, Markey and Velázquez warned the agency about what they described as "draconian" requirements that could harm immigrant entrepreneurs.
Additional concerns emerged in September when lenders flagged potential operational issues with implementing such strict rules, followed by December observations from Democratic members of the Senate Small Business Committee who pointed to a noticeable decline in SBA lending volumes potentially linked to anticipated policy changes.
Despite multiple formal letters and feedback from lending institutions, the SBA has not provided any formal response to these concerns, according to the lawmakers. This lack of engagement has further fueled criticism that the administration is proceeding without adequate consideration of the policy's broader economic and social implications.
