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SBA Adjusts Small Business Loan Ownership Rules Under Revised Eligibility Standards

A small-business loan enabled Sayuri Tsuchitani to open a Japanese head spa in Los Angeles after two decades working as a hairstylist. The U.S. Small Business Administration later updated its ownership requirements for loan approvals.

Tsuchitani, a lawful permanent resident who arrived from Japan in 1998, received funding through a pandemic-era program. She opened multiple locations and hired additional staff. Under current SBA rules, businesses must meet specific ownership criteria tied to U.S. citizenship or lawful permanent resident status.

The agency announced in March that it would limit approvals to firms meeting updated ownership thresholds. Official notices state that lawful permanent residents remain eligible as owners. Earlier public statements referenced efforts to exclude certain noncitizens described as “hostile foreign nationals” or “illegal aliens.” The final policy maintained eligibility for green-card holders while tightening verification for other categories.

Agency head Kelly Loeffler stated in a March interview that SBA loans are intended for American citizens. An agency spokesperson said the changes aim to direct funding toward U.S. job creators. A 2025 audit had identified one loan approved for a business with partial ownership by an individual lacking legal status.

Data from the U.S. Census Bureau indicate that foreign-born individuals, who comprise about 15 percent of the population, own 20 to 25 percent of U.S. businesses. A National Foundation for American Policy analysis released this month estimated that immigrants and their children founded two-thirds of U.S. startups valued above $1 billion. The SBA has not released projections on how the ownership rules may affect overall business formation rates.

Last year, 4 percent of SBA loans involved businesses with permanent-resident owners. The agency serves as a primary source of government-backed financing for smaller firms that may not qualify for conventional bank credit. Cristina Foanene, who moved from Romania two decades ago under investor provisions and later became a citizen, used multiple SBA loans to expand a glass manufacturing and installation company in Fresno, California, adding roughly 30 employees.

Lenders that participate in SBA programs now conduct additional citizenship verification steps during underwriting. Some transactions experienced delays while documentation was reviewed. Eight business owners who are lawful permanent residents declined to comment publicly about pending applications, citing concerns over scrutiny of their status.

Members of Congress, including Sen. Ed Markey and Rep. Nydia Velázquez, introduced legislation to codify eligibility language for permanent residents in statute. The bill remains pending in committee.

Traditional bank lending to small firms has historically been limited. Alternative financing options such as merchant cash advances carry higher effective costs in some cases. The SBA has not issued guidance projecting changes in loan volume or employment outcomes tied to the revised ownership standards.

The agency continues to require that at least one owner meet citizenship or lawful permanent resident criteria for program participation. Verification processes now include cross-checks with federal immigration records in addition to prior documentation requirements.

Tsuchitani’s business continues to operate under the terms of the earlier loan. Foanene’s company has completed its most recent expansion projects. Both owners have described the initial financing as a factor in subsequent growth and hiring decisions.

NPR’s Katie Daugert contributed to this report.