SBA Tightens Eligibility: Green Card Holders Now Barred From SBA 7(a) and 504 Loans Starting March 1, 2026

A major policy shift is coming to the SBA’s flagship lending programs, and it’s already sparking intense debate across the small business and political landscape.

According to a new SBA policy notice, effective March 1, 2026, the agency will no longer guarantee SBA-backed loans for businesses that have any direct or indirect ownership by non-U.S. citizens, including lawful permanent residents (green card holders). The updated rule requires 100% of all owners to be U.S. citizens or U.S. nationals, with their principal residence in the United States (or its territories/possessions).

This change applies to the SBA’s two most commonly used programs for acquisition, expansion, working capital, refinancing, and real estate projects: 7(a) and CDC/504.

What exactly changed?

Over the last several months, SBA eligibility rules around citizenship and ownership have moved quickly:

• In prior guidance, SBA rules generally allowed eligibility when ownership met certain thresholds that included lawful permanent residents.

• In late 2025, SBA guidance had briefly allowed a limited amount of non-qualifying ownership (widely reported as up to 5% in certain cases).

• The newest policy rescinds that direction and now excludes lawful permanent residents entirely, requiring 100% U.S. citizen/U.S. national ownership.

From an underwriting and deal-structuring standpoint, the “direct and indirect owners” language is important: it implies SBA will look through cap tables and ownership chains, not just the names on the borrower entity’s operating agreement.

The argument for the change (how supporters frame it)

Because this is politically charged, it helps to separate the policy rationale from the rhetoric. Supporters of the tighter rule tend to emphasize three themes:

1) “Taxpayer-backed guarantees should prioritize citizens”

The SBA’s programs don’t usually lend directly; they guarantee loans made by banks and other lenders, which is effectively a federal credit enhancement. Supporters argue that if the federal government is standing behind loans, it’s reasonable to prioritize businesses fully owned by citizens/nationals.

2) A simple rule is easier to enforce

A bright-line standard (100% citizen/national ownership) is easier for lenders and regulators to apply than nuanced thresholds and exceptions, especially when ownership structures can be complex.

3) Broader immigration and enforcement alignment

The SBA has said this update aligns with a Trump administration executive order framework referenced in SBA documentation and coverage, and it fits within a broader push toward stricter eligibility for federal benefits and programs.

From a Republican perspective, those points typically land as “protect the integrity of federal programs” and “keep incentives aligned with citizenship.” From some Democrats in more enforcement-oriented districts, the “clarity and enforceability” argument can also resonate, even if they disagree with the breadth of the exclusion.

The argument against the change (how critics frame it)

Opponents aren’t just making a moral argument; many are making an economic one.

1) Lawful permanent residents are legal, tax-paying business owners

Green card holders are authorized to live and work in the U.S. and often build multi-year local roots. Critics argue it’s inconsistent to treat them as eligible to build businesses, hire workers, and pay taxes—but ineligible for one of the most important small business credit programs.

2) Immigrant entrepreneurship is a meaningful driver of job creation

Business advocacy groups and multiple reports emphasize that immigrants start businesses at high rates and contribute significantly to local employment and economic activity. Critics say excluding lawful permanent residents could suppress job creation—ironically conflicting with the stated goal of expanding it.

3) It hits “mixed-ownership reality” in the real world

Many legitimate small businesses have ownership structures that include:

• a spouse with different citizenship status

• a minority investor who is a lawful permanent resident

• employee equity participation

• family partnerships across status lines

Under the new rule, even small percentages can trigger ineligibility, based on reporting and analysis.

From a Democratic perspective, the strongest critique is often that this is a sweeping exclusion of legal residents that will disproportionately impact immigrant-heavy communities and industries. From some pro-business Republicans and industry stakeholders, the critique is more practical: “this blocks credit to job creators who are already here legally.”

Where this likely goes next

The political fight over this won’t be quiet. There’s already public opposition from advocacy organizations and Democratic lawmakers, and broader coverage suggests this could become part of a larger election-cycle economic narrative: who gets access to capital, and on what terms.

Even if the rule stays in place, it may spur:

• lender-side tightening in documentation around ownership and residency

• more borrowers steering away from SBA timelines altogether

• increased demand for alternative credit products for impacted founders