Green Card Holders Face Loan Restrictions Under New US Rule

A new policy from the US Small Business Administration (SBA) will restrict green card holders from receiving business loans backed by the agency, effective March 1. The change impacts both existing and new borrowers and applies broadly to businesses with any ownership stake held by a green card holder.

The policy reverses previous flexibility and aligns with a stricter approach to federal credit programs for non-citizens.

Scope of the Restriction

The rule applies to various aspects of business ownership and participation, including borrowers applying for SBA-backed loans, operating companies linked to the loan, and eligible passive companies. It encompasses both direct and indirect ownership interests. Even a small, non-controlling ownership stake held by a green card holder can now disqualify a business from receiving SBA-backed funding.

Policy Requirements

A policy notice issued last week mandates that 100 percent of all direct and indirect owners of a loan applicant must be US citizens or US nationals residing in the United States or its territories. This requirement represents a shift from previous guidelines.

Common Uses of SBA Loans

SBA-backed loans are a significant source of financing for small businesses nationwide. Two primary lending programs are frequently utilized: 7(a) loans, which provide funding for working capital, inventory, refinancing, and equipment; and 504 loans, which assist with the purchase of commercial real estate and heavy machinery. In California’s Central Valley, top SBA lenders guaranteed loans totaling $115.6 million, demonstrating the program’s importance to local business financing.

Exemptions

Certain categories of foreign nationals are not affected by the new rule. These include EB-5 investors, whose businesses typically do not rely on SBA funding, and individuals holding H-1B or L-1 visas, who were previously ineligible for SBA loans.

Criticism of the Rule

The policy change has drawn criticism from legal professionals and Democratic lawmakers. Concerns have been raised regarding the impact on immigrant entrepreneurs and the consistency of the policy with the SBA’s mission. The change marks the second reversal of SBA citizenship rules in recent months, following a previous allowance for up to 5 percent foreign national ownership that has now been withdrawn. Lawmakers have described the policy as hostile to immigrant entrepreneurs and have accused the administration of stoking fear and confusion among small business owners.