SBA Loan Eligibility Tightens: What It Means for Foreign Investors
How foreign entrepreneurs face new roadblocks in business acquisition plans.
In 2025, the Small Business Administration (SBA) tightened its lending rules, making non-U.S. citizens and non-green card holders ineligible for SBA-backed loans. Here’s how the change is affecting qualified international buyers, and what financing alternatives still exist.
The Story
Earlier this year, I was introduced to a buyer from the United Kingdom who planned to relocate his family to Texas. Let’s call him Josh. He owns a successful renovation business in England and was looking for a similar operation across the pond to move over with his wife and two kids.
His goal was to acquire a local business in the construction space, operate it with his specific skills in the industry, and grow it.
The plan was to use the SBA 7(a) loan while applying under the E-2 investor visa. We built a shortlist of qualified businesses, while he connected with lenders to explore financing prequalification. It was at this point where things grinded to a halt.
What Changed
Under the new SBA policy, non-U.S. citizens and non-green card holders are no longer eligible for SBA loans.
In March of 2025, the SBA released Policy Notice 5000-865754, which updated its Standard Operating Procedures (SOP 50 10 7.1) and introduced stricter citizenship requirements for SBA 7(a) and 504 loans.
Here’s what took effect:
- 100% of beneficial ownership in the applicant business must belong to U.S. citizens, nationals, or lawful permanent residents (LPRs).
- The SBA removed exceptions that sometimes allowed non-citizens to qualify. That includes anyone under E-2, DACA, or refugee status.
- Every owner of a business applying for an SBA loan must now be a U.S. citizen or green card holder. Even a small percentage of ownership by someone on a temporary visa (like E-2, L-1, or H-1B) can disqualify the loan.
In short, the SBA cannot guarantee loans to any business where non-LPR or non-citizen individuals have ownership or control.
Before this, there were still hoops to jump through for buyers to qualify for an investor loan. Some lenders could approve E-2 visa holders under limited “qualified alien” exceptions. That flexibility has now been removed, closing a pathway many international entrepreneurs relied on.
This affects foreign investors who bring experience, capital, and a desire to build the U.S. economy.
What This Means for Buyers
For non-citizen entrepreneurs moving to the U.S. under the E-2 investor visa, SBA-backed financing is no longer a viable option. However, that doesn’t mean acquisition plans are impossible. It just means the deal structure will look different, and will require more creativity.
You’ll need to source financing that doesn’t depend on an SBA guarantee. Here are some practical alternatives.
- Bank / Non-SBA Acquisition Loans: Private loans are an option. Some banks and credit unions still finance acquisitions without SBA backing. Expect higher rates, shorter terms, and stricter underwriting.
- Seller financing: If you’re a buyer with skills and capital, this is a powerful tool in these situations. Sellers may be willing to carry 20–30% of the purchase price (or more) as a note, bridging the financing gap. The buyer can come up with the rest from one or more sources, like personal funds, non-SBA loans, and investors.
- Private Investors or U.S. Citizen Partners: Partnering with a U.S. citizen can leverage financing options that would otherwise be unavailable, although this changes ownership dynamics.
- Asset-Based or Hard Money Lenders: These lenders focus on collateral, like equipment, vehicles, or property. Rates are higher but approvals can be faster.
- Hybrid Capital Stack: Buyers will blend multiple sources, such as bank debt, seller financing, and private capital to create a workable deal.
Additional Changes in SBA Rules for All Buyers
Beyond citizenship changes, more shifts have arrived with the new SOP 50 10 8, replacing SOP 50 10 7.1. Many of them impact all borrowers, not just international investors. They include:
- Tighter down payment requirements. Buyers must put in more verified cash upfront for business purchases. Seller financing only counts toward that requirement if it’s completely deferred (no payments) for the life of the loan.
- Lower collateral threshold. The requirement for collateral is stricter. Lenders can’t rely only on cash flow anymore. Many loans (even smaller ones) will need collateral backing. They must secure the loan with business assets or personal property whenever possible.
- Hazard, flood, and life insurance reinstated for certain loans. Insurance is mandatory again in many cases, especially for principals or properties.
- Stricter underwriting and eliminating “Do What You Do.” Lenders used to have flexibility in how they evaluated credit and risk. Now, lenders are responsible for verifying owner eligibility, obtaining immigration documents, tracking date of birth, validating tax transcripts, and managing stricter “credit elsewhere” tests. They also need to collect and store immigration and ID documents for every beneficial owner.
- Tighter franchise-related oversight. The SBA reinstated its Franchise Directory, meaning if a brand is not in that directory, the deal must pass deeper franchise / license / control reviews.
- “Look-back” ownership rule. If an ineligible owner or key manager was involved with the business in the six months before applying, the deal can be denied, even if they’ve since exited. Example: A foreign investor who sold their stake just before the application was still considered ineligible under this rule, resulting in a loan denial.
- No more personal liquidity tests. Previously, borrowers could be denied if they had too much personal wealth or liquidity, because SBA loans were meant to serve those without other financing options. As of 2025, that rule is gone. Wealthy borrowers with significant assets or cash on hand can now qualify for SBA loans. This broadens access for high-net-worth individuals and business buyers who used to be rejected for having “too much money.”
Because of these changes, deals that looked feasible under older rules might now fail compliance tests. Small business owners can also expect higher borrowing costs.
Bottom Line: A Shift in the Financing Playing Field
This marks a change for foreign entrepreneurs who want to invest in and operate U.S. businesses. Many of them run successful companies abroad and bring valuable skills, capital, and employment opportunities with them. Policies that narrow access to financing risk slowing down that momentum.
The new SBA rules make entry more challenging. The U.S. small business ecosystem benefits from experienced operators who want to buy and grow existing companies.
Still, the path forward exists. Now it requires more creativity, negotiation, and capital flexibility than before. In Josh’s case, an acquisition is still in the works. He will liquidate other assets to come up with the cash to make a deal work, but for many first-time buyers, this is not an option.
For buyers in similar situations, focus on seller financing, connect with local lenders who offer non-SBA acquisition loans, and structure the deal in a way that still supports an E-2 visa application.
Experienced international operators continue to see the U.S. as a place to build. The goal hasn’t changed, but the financing framework has.
Working with a business broker and getting pre-approved for financing can make you a stronger candidate. Visit BizBuySell’s Broker Directory or Finance Center to connect with professionals who can help you structure and fund your acquisition.
Lauren is a 2x founder turned M&A advisor. Before M&A, her own projects included an agency, a wellness brand, a hand in a SaaS company, and a few others in between. She also consults fractionally on portfolio companies. Now, those experiences help her support business owners navigating the process with fewer headaches.