A new SBA rule requires 100% U.S. citizen ownership, cutting lawful permanent residents out of key small-business financing.
Beginning March 1, 2026, lawful permanent residents — green card holders who have long been pillars of the U.S. small business economy — will no longer qualify for Small Business Administration–backed loans, marking one of the most consequential shifts in federal small-business financing policy in years.
Under the new SBA rule, 100 percent of a business’s direct and indirect ownership must be held by U.S. citizens or nationals to qualify for government-backed loan programs, including the widely used 7(a) and 504 loans. Even a minimal ownership stake held by a green card holder will disqualify an otherwise eligible business.
The policy reverses prior SBA guidance, including a December 2025 rule that allowed limited non-citizen ownership under a narrow exception. That carveout is now gone.
“This is a sharp and unexpected break from decades of practice,” said lending professionals cited by The Business Journal, which first reported the change. “Green card holders pay taxes, hire workers, and build businesses — but this rule treats them as if they’re temporary participants in the economy.”
According to SBA data, immigrants are nearly twice as likely to start businesses as U.S.-born citizens, and lawful permanent residents make up a significant share of owners in construction, hospitality, logistics, retail, and professional services — sectors that rely heavily on SBA-backed credit to scale or survive downturns.
For Latino entrepreneurs in particular, the impact could be immediate. Many family-owned businesses operate with mixed-status ownership structures — spouses, siblings, or partners who are lawful residents but not yet citizens. Under the new rule, those structures are no longer viable if SBA financing is required.
There are no exceptions under the policy. Any percentage of green card ownership disqualifies a business. The only path to eligibility is full ownership restructuring or naturalization — a process that can take years.
The SBA has stated the change is part of a broader effort to tighten citizenship and residency requirements across federal programs, though it has not released economic impact estimates or data on how many businesses will be affected.
Borrowers currently in the pipeline face a hard deadline: any SBA loan involving a green card holder owner must receive an SBA loan number before March 1, 2026, or it will be denied.
Business attorneys and lenders are urging affected owners to review operating agreements immediately.
“This isn’t just a regulatory tweak,” one SBA lender told The Business Journal. “It fundamentally redraws who the federal government considers worthy of investment.”
For thousands of immigrant-founded businesses — many deeply embedded in local economies — the message is clear: permanence in practice no longer guarantees inclusion in policy.
Note: This article is for informational purposes only and does not constitute legal or financial advice.
