In a move aimed at tightening access to federal small business loans and aligning with the Trump administration's "America First" agenda, the U.S. Small Business Administration (SBA) has announced a policy change that will exclude businesses with any ownership by legal permanent residents—commonly known as green card holders—from eligibility for SBA-backed financing starting March 1, 2026. This reversal of longstanding rules has sparked backlash from Democratic lawmakers and immigrant advocates, who argue it undermines the American Dream for legal immigrants, while SBA officials defend it as a necessary step to ensure taxpayer funds support U.S. citizens exclusively.
The policy, detailed in a notice issued on February 2, 2026, requires that 100% of direct and indirect owners of a loan applicant be U.S. citizens or nationals residing in the United States or its territories. It affects key programs like the 7(a) loans for general business needs and 504 loans for real estate and equipment purchases. Previously, green card holders were eligible to own stakes in businesses seeking these loans, but the new rule rescinds a December 2025 procedural notice that had briefly allowed up to 5% foreign ownership—while specifically barring Chinese citizens—and now extends the exclusion to all legal permanent residents (LPRs).
SBA Administrator Kelly Loeffler, a former U.S. Senator from Georgia and Trump ally, has positioned the change as part of broader efforts to advance President Donald J. Trump's economic priorities. While Loeffler has not issued a direct public statement on this specific policy, her office emphasized in recent communications that the SBA is focused on "cracking down on fraud" and "boosting manufacturing" to unleash a "new golden era for small businesses." SBA spokesperson Maggie Clemmons said, "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."
The policy stems from Executive Order 14159, titled "Protecting the American People Against Invasion," signed by President Trump to prevent federal benefits from flowing to unauthorized individuals under immigration laws. SBA officials argue the update reinforces eligibility standards in the Code of Federal Regulations and prioritizes U.S. citizens amid concerns over immigration and national security. This builds on earlier actions, such as a 2025 policy that limited loans to businesses with 100% ownership by citizens, nationals, or LPRs, excluding undocumented individuals, refugees, asylees, and certain visa holders. The latest escalation now treats green card holders—legal immigrants who have resided in the U.S. for years—as ineligible, even for minority stakes.
Critics contend the rule will disproportionately harm immigrant-founded businesses, which often drive job creation and economic revitalization. Lenders like Frank Gallegos of the Cen Cal Business Finance Group estimate that about 10% of their SBA loans involve LPR ownership, forcing affected businesses to seek costlier conventional financing or restructure ownership—options that may not be feasible before the deadline.
Democratic elected officials have been vocal in their opposition. Senate Small Business Committee Ranking Member Edward J. Markey (D-Mass.) and House Small Business Committee Ranking Member Nydia Velázquez (D-N.Y.) issued a joint statement condemning the policy as a "devastating attack on immigrant entrepreneurs."
"Rather than support hard-working legal immigrants to start or expand a business, the Trump SBA is choosing hatred by barring green card holders from receiving an SBA loan," they said. "The Administration’s message to immigrants is clear: you are not welcome to pursue the American Dream." Senator Patty Murray (D-Wash.) and other Democrats have also demanded answers from the SBA on the citizenship verification requirements, citing a 46% drop in small business lending since mid-2025 and arguing that the rules spread fear among legal immigrant owners.
On the Republican side, support for restricting SBA loans to citizens aligns with broader efforts to block funding for undocumented immigrants. Congressman Pat Harrigan (R-N.C.) recently voted for legislation ensuring taxpayer-backed loans go only to U.S. citizens, lawful permanent residents, and legal immigrants, stating, "American taxpayers shouldn’t be footing the bill for illegal immigrants to start businesses." However, the new policy goes further by excluding LPRs entirely, marking a significant escalation in actions against foreign entities in federal lending.
The change comes amid ongoing debates over immigration and economic policy in the second Trump administration. While proponents see it as safeguarding American resources, opponents warn it could stifle entrepreneurship and economic growth, particularly in diverse communities.
“Hearing that legal permanent residents will soon be barred from SBA-backed loans, I wondered, do they pay income tax? Yes. Then I asked, will they be compensated in some way? No. They will still have to pay income tax. Such loan recipients, even citizens of foreign countries, must document the use of proceeds. That money cannot easily (if at all) be sent overseas. So why the squeeze? Answer: The SBA lets small business contracts go to big businesses. No surprise for it to shrink the assistance it gives small businesses (the 5% to 15% of such loans that will no longer go to companies with some ownership by legal permanent residents). The Small Business Administration is a front for big business,” said Bruce de Torres, Director of Communications for the American Small Business League.
Businesses with pending applications involving LPR owners must secure an SBA loan number before March 1 to remain eligible, adding urgency to the transition.
Mark Anthony is a former Silicon Valley Executive with Forrester Research, Inc. (Nasdaq: FORR). He is now the host of the nationally syndicated radio called The Patriot and The Preacher Show. Find out more at patriotandpreachershow.com.
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