The headquarters of the U.S. Small Business Administration in Washington, D.C. The agency recently announced revised eligibility rules that will require SBA-backed loan applicants to be fully owned by U.S. citizens or U.S. nationals residing in the United States or its territories, effective March 1, 2026. – Photo credit: GAO photo (U.S. Government Accountability Office)
WASHINGTON, D.C. — The Small Business Administration has imposed new restrictions on its capital programs that will require all businesses seeking SBA-backed loans to be owned entirely by U.S. citizens or U.S. nationals with a principal residence in the United States or its territories, according to updated agency guidance.
The revised rules take effect March 1, 2026, and rescind a limited ownership exception introduced by the agency in late 2025.
December policy allowed limited foreign ownership
On December 19, 2025, the SBA issued a procedural notice updating its lending standards under Standard Operating Procedure (SOP) 50 10 8. That guidance permitted businesses applying for SBA financing to have up to 5 percent aggregate ownership held by foreign nationals, as well as U.S. citizens or U.S. nationals whose principal residence was outside the United States.
The exception applied to the SBA’s primary loan guarantee programs, including the 7(a) working capital program and the 504 real estate and equipment financing program.
New guidance rescinds exception and tightens eligibility
In guidance issued in early February, the SBA formally rescinded the December notice and eliminated the 5 percent ownership exception. Under the revised rules, 100 percent of a borrower’s direct and indirect owners must be U.S. citizens or U.S. nationals who maintain a principal residence in the United States, its territories, or possessions.
The updated policy further specifies that lawful permanent residents, commonly referred to as green card holders, are not eligible to own any percentage interest in a business seeking SBA-backed financing. Businesses with even indirect ownership by an ineligible individual do not qualify.
The SBA generally does not issue loans directly, except in disaster assistance programs, but guarantees loans made by private lenders. Those guarantees often allow borrowers to obtain lower interest rates and longer repayment terms than conventional commercial loans.
SBA cites domestic ownership focus
In an emailed statement reported by the Associated Press, an SBA spokesperson said the revised rules are intended to ensure that taxpayer-backed loan guarantees are directed to businesses fully owned by U.S. citizens or nationals residing domestically.
The agency has not announced any transitional provisions beyond the March 1 effective date.
Congressional Democrats criticize policy shift
Democratic members of the House and Senate Small Business Committees criticized the change, saying it departs from prior SBA practice and will restrict access to capital for businesses with legal permanent resident owners.
In a joint statement, ranking members of the committees said the policy reverses the December 2025 guidance and excludes green card holders from participating in SBA lending programs, which they described as inconsistent with the agency’s mission to expand small-business access to credit.
Part of broader changes to SBA lending standards
The revised citizenship and residency requirements follow a series of SBA updates over the past year that have narrowed eligibility and revised documentation standards across multiple loan programs.
