The U.S. Small Business Administration (SBA) has announced a major policy change that will prevent businesses with legal permanent residents (green card holders) from accessing SBA-backed loans, prompting sharp criticism from Democratic lawmakers.
In a policy notice published Feb. 2, the SBA said the changes will take effect March 1, 2026.
100% US citizen ownership now mandatory
Under revised Standard Operating Procedure (SOP) 50 10 8, SBA will require that 100% of all direct and indirect owners of a small business applicant be U.S. citizens or U.S. nationals who have their principal residence in the United States, its territories, or property.
The update complies with 13 CFR 120.100 and Executive Order 14159, entitled “Protecting the American People from Invasion.”
Green card holders are prohibited from owning any loan applicants
The new policy specifically makes legal permanent residents (LPRs) ineligible to hold any ownership interest—direct or indirect—in an SBA loan applicant, operating company (OC), or eligible passive company (EPC).
This means a significant tightening compared to the previous rules.
The former 5% foreign ownership exemption has been abolished
This notice supersedes SBA Procedural Notice 5000-872050, which allowed up to 5% ownership by foreign nationals or US citizens, nationals, or LPRs residing outside the US.
That narrow exception will no longer apply from March 1.
Democrats criticize the SBA’s move
Senator Edward J. Markey of Massachusetts and Representative Nydia Velázquez of New York, the leading members of the Senate and House of Representatives on small business, condemned the decision.
“The Trump administration is fanning the flames of hate, spreading fear and confusion among immigrants and small business owners. Instead of supporting hard-working legal immigrants to start or expand businesses, the Trump SBA is choosing hate by preventing green card holders from getting an SBA loan. The administration’s message to immigrants is clear: You are not welcome to pursue legal immigrants by immigrants,” they said. business.
Previously Raised Concerns Ignored: Lawmakers
Lawmakers noted that concerns about stricter citizenship verification rules have been brought to the SBA’s attention repeatedly.
In July, Markey and Velázquez warned the agency against “draconian” demands. In September, lenders cited operational problems, while in December, Democratic members of the Senate Small Business Committee pointed to a decline in SBA loan volume.
Despite numerous letters and feedback from lenders, the SBA has not formally responded, they said.