SBA rule change bars non-U.S. citizens, including green card holders, from loans

The U.S. Small Business Administration (SBA) has overhauled its lending rules, restricting SBA loan eligibility to businesses that are 100% owned by U.S. citizens starting March 1. As a result, lawful permanent residents, also known as green card holders, will be fully excluded, along with any business that has even a minority foreign ownership stake.

The SBA announced the change in a policy notice released on February 2. The revised rules apply broadly to the agency’s flagship loan programs, including the 7(a) and 504 loans. Therefore, the update marks one of the most sweeping eligibility changes in recent years.

Under the new rules, all direct and indirect owners of an applicant business must be U.S. citizens or U.S. nationals. In addition, all owners must reside in the United States or its territories. Previously allowed exceptions—such as permitting up to a 5% foreign ownership stake—have now been formally eliminated.

Most notably, the status of green card holders has changed entirely. Until now, lawful permanent residents were treated the same as U.S. citizens for SBA loan purposes. However, under the revised policy, green card holders may not hold any ownership interest at all. This restriction applies not only to the operating company but also to holding companies or asset-owning entities linked to the business.

As a result, the new SBA loan eligibility rules are expected to have significant ripple effects across immigrant-owned small businesses. This includes sectors that rely heavily on SBA-backed financing, such as retail, food service, and personal services.

In particular, Korean American banks and immigrant-focused lenders are likely to feel the impact. A source in the Korean American financial sector said SBA loans have long been one of the most accessible forms of policy-backed financing for small businesses with limited collateral. Therefore, excluding green card holders could directly affect many self-employed Korean Americans.

Another financial industry official questioned whether the policy aligns with the SBA’s mission. The official noted that green card holders are lawful residents who pay taxes and operate legitimate businesses. As a result, critics argue that the change may push immigrant entrepreneurs out of the formal financial system.

Meanwhile, the SBA said additional details on how the rule will be implemented will be provided through local SBA offices. Businesses with mixed ownership structures are encouraged to review their eligibility carefully before applying.

Although the SBA has framed the change as a clarification of eligibility standards, concerns remain that the revised SBA loan eligibility rules could narrow access to capital for a large segment of the small-business community.

BY HANKIL KANG  [kang.hankil@koreadaily.com]