The US Small Business Administration (SBA) has announced a major policy shift that will bar businesses with legal permanent residents (green card holders) from accessing SBA-backed loans, drawing sharp criticism from Democratic lawmakers.
In a policy notice published on February 2, the SBA said the changes will take effect from March 1, 2026.
100% US citizen ownership now mandatory
Under the revised Standard Operating Procedure (SOP) 50 10 8, the SBA will require that 100% of all direct and indirect owners of a small business applicant be US citizens or US nationals who maintain their principal residence in the United States, its territories, or possessions.
The update is aligned with 13 CFR 120.100 and Executive Order 14159, titled “Protecting the American People Against Invasion.”
Green Card holders barred from any ownership in loan applicants
The new policy explicitly makes legal permanent residents (LPRs) ineligible to hold any ownership stake—direct or indirect—in an SBA loan applicant, operating company (OC), or eligible passive company (EPC).
This marks a significant tightening from earlier rules.
Earlier 5% foreign ownership exception scrapped
The notice rescinds SBA Procedural Notice 5000-872050, which had allowed up to 5% ownership by foreign nationals or by US citizens, nationals, or LPRs residing outside the US.
That narrow exception will no longer apply from March 1.
Democrats slam SBA move
Senator Edward J. Markey of Massachusetts and Representative Nydia Velázquez of New York, the ranking members of the Senate and House Small Business Committees, condemned the decision.
“The Trump administration is stoking the flames of hatred, spreading fear and confusion among immigrants and small business owners. Rather than support hard-working legal immigrants to start or expand a business, the Trump SBA is choosing hated by barring green card holders from receiving an SBA loan. The Administration’s message to immigrants is clear: you are not welcome to pursue the American Dream,” they said, accusing the SBA of undermining legal immigrants pursuing entrepreneurship.
Concerns raised earlier ignored: Lawmakers
Lawmakers noted that concerns over stricter citizenship verification rules had been raised repeatedly with the SBA.
In July, Markey and Velázquez warned the agency about “draconian” requirements. In September, lenders flagged operational issues, while in December, Democratic members of the Senate Small Business Committee pointed to a decline in SBA lending volumes.
Despite multiple letters and lender feedback, the SBA has not formally responded, they said.
