SBA Update: Green Card Holders Lose Eligibility for SBA Loans Starting March 1, 2026
What Changed, Why it Matters, and What Business Buyers and Owners Should Do Now
The U.S. Small Business Administration (SBA) issued a policy change with significant impacts: Beginning March 1, 2026, green card holders (lawful permanent residents) will no longer be eligible for SBA-backed loans. Every owner of the borrowing business must be a U.S. citizen or U.S. national residing in the U.S. or its territories.
This rewrites one of the SBA’s foundational eligibility rules, directly affecting the primary financing pathway many small business buyers and owners rely on.
What Changed and Why
Under the SBA’s updated Standard Operating Procedure (SOP 50 10 8):
- Green card holders are no longer eligible: Even a 1 percent ownership stake by a lawful permanent resident will disqualify the business from SBA financing after March 1, 2026. Every direct and indirect owner of a business applying for SBA loans, including 7(a) and 504 programs, must be a U.S. citizen or national.
- Indirect ownership counts: If a lawful permanent resident (LPR) holds interest through a holding company, trust, or layered entity, the business is still ineligible.
This goes further than earlier 2025 policy tweaks, even beyond the brief allowance for up to 5 percent foreign ownership that surfaced late last year. That exception has now been fully rescinded.
Which SBA Programs Are Affected
Every major SBA financing program is impacted:
- SBA 7(a): The most common loan for working capital, acquisition financing, and general business needs.
- SBA 504: Typically used for buying commercial real estate and large-ticket capital equipment.
If a business’s ownership fails the new citizenship test on or after March 1, that borrower will be ineligible for these loans. Lenders have to verify ownership before issuing an SBA loan number. Applications approved before March 1 can still close under the old rules, but new ones will not qualify.
What This Means for Buyers and Small Business Owners
1. Fewer Financing Options for Entrepreneurs
SBA loans are widely used because they lower down payments (often to about 10 percent) and offer long terms. With this shift:
- Businesses with any ownership by a legal permanent resident will need to restructure before they can pursue SBA funding.
- Transferring equity to a U.S. citizen family member or partner might qualify the business again, but these changes come with tax, governance, and legal complexities.
2. Deals Must Close or Restructure Before March 1
For acquisitions already in progress involving LPR owners, timing matters. SBA loan numbers must be issued before March 1 to lock in eligibility under the old rules. After that deadline, the new ownership rule applies.
3. More Entrepreneurs Will Be Pushed Toward Conventional Credit
Without SBA backing:
- Bank term loans and equipment financing often require larger down payments and shorter amortization schedules.
- Rates may be higher and terms less favorable than those offered through SBA guarantees.
- Smaller or newer businesses with limited collateral may find traditional financing difficult to secure.
In markets where green card–owned businesses make up a meaningful share of borrowers, lenders estimate this change will remove roughly 5–15 percent of existing SBA loan volume from eligibility, depending on region and industry.
Impact on Local Economies and Entrepreneurship
Immigrant-founded businesses often:
- Create jobs
- Revitalize underutilized assets
- Drive innovation and economic activity in their communities
Critics argue that the policy undercuts the economic momentum SBA loans are designed to support.
What Buyers and Owners Should Do Now
Review Ownership Structures Immediately
If you are pursuing SBA financing, confirm whether any part of your ownership chain includes LPRs or other non-citizens. Even indirect stakes matter under the new definition. If you are a legal permanent resident currently under contract with purchasing a business, SBA is no longer an option. If you are already far along in the process, you may still be able to complete the transaction before March 1.
Consider Strategic Restructuring (With Counsel)
Options such as transferring ownership to eligible parties (such as U.S. citizen co-owners) might restore eligibility, but you need legal and tax advice to manage implications.
Explore Alternative Financing Sources
- Conventional bank loans
- Equipment financing
- Seller financing and earnouts
- Private credit or equity investors
These tools don’t rely on SBA guarantees, but they come with different trade-offs in terms, rates, and risk.
Talk to Your Lender Early
Many community banks and credit unions are already preparing for the transition. They can help map out financing pathways now before the March 1 deadline.
Where Things Stand
Starting March 1, 2026, SBA-backed loans will be reserved for businesses fully owned by U.S. citizens or nationals. That means green card holders, who are legal permanent residents, lose eligibility entirely.
Affected owners and buyers will need to rethink ownership structures and financing strategies or lean on more expensive conventional credit solutions. For deals already in progress, time is of the essence to close them before March.
Lauren is a 2x founder turned M&A advisor at Lion Business Advisors. Before full-time M&A, her projects included an agency, a wellness brand, a hand in a SaaS company, among others. She also consults fractionally on portfolio companies. Now that background helps her guide business owners through exits with fewer headaches and stronger outcomes.