The U.S. Small Business Administration (SBA) has issued a sweeping policy reversal that will bar legal permanent residents (LPRs), commonly known as green card holders, from accessing federal loan programs starting March 1, 2026. This new directive mandates that 100% of a business’s direct and indirect owners must be U.S. citizens or U.S. nationals who maintain their primary residence within the United States or its territories. The rule, detailed in a new SBA notice, effectively terminates eligibility for millions of green card holders who are authorized to live and work permanently in the country and were previously treated as equivalent to citizens for SBA lending purposes.
The change rescinds previous guidance that allowed for a narrow exception where a borrower could have up to 5% ownership held by foreign nationals or legal permanent residents living outside the United States. Under the new standard, the SBA explicitly stated that legal permanent residents will no longer be eligible to own any percentage interest in an applicant business seeking government-backed capital. While the rule does not prohibit non-citizens from owning businesses or accessing conventional bank loans, it removes the most affordable federal safety net used by millions of entrepreneurs to start or grow their operations.
Democratic lawmakers and human rights groups have condemned the decision, arguing it undermines the “American Dream” for hard-working legal immigrants who pay taxes and contribute significantly to the economy. U.S. Representative Grace Meng stated that the move denies essential capital to those who need it most, while critics argue the policy contributes to a “fearful environment” for minorities already facing visa revocations and increased deployment of federal agents. Conversely, President Donald Trump has cited domestic security concerns and the need for fraud prevention to justify his administration’s tightening of eligibility requirements.
As the March 1 deadline approaches, the SBA’s primary 7(a) and 504 loan programs will be restricted exclusively to citizen-owned firms. This represents a significant shift in U.S. economic policy, potentially sidelining a demographic that, according to Census data, is twice as likely to start new businesses as U.S.-born residents. Legal challenges are expected as advocacy groups argue the rule unfairly targets residents who have been granted the legal right to build lives and businesses on American soil.
