On March 1, 2026, the SBA changed who may own a business that borrows through its two largest loan programs. Every direct and indirect owner of a 7(a) or 504 borrower now has to be a U.S. citizen or U.S. national who lives in the United States. Lawful permanent residents, who had been able to own SBA borrowers alongside citizens, are now shut out entirely. A month later the same standard reached SBA microloans.
This guide explains what the rule says, how lenders apply it, how many borrowers it touches, where it stands in November 2026, and what an affected owner can do instead.
What the rule says
SBA financing is now limited to businesses whose owners, all of them, and any guarantor SBA requires are U.S. citizens or U.S. nationals with their principal residence in the U.S., its territories or possessions. The rule is in SBA Procedural Notice 5000-876626, issued February 11, 2026 and effective March 1, 2026. It works alongside Policy Notice 5000-876441, which SBA published February 2, 2026.
The notice names categories of "Ineligible Persons" who may not hold any ownership:
- Lawful permanent residents (green card holders), whether their status is conditional or unconditional
- Anyone who is not a U.S. citizen or national, including visa holders and other non-resident aliens
- Asylees, refugees and DACA recipients
- U.S. citizens or nationals whose principal residence is outside the U.S. and its territories
The rule covers indirect ownership too. If a holding company owns part of the business, the people behind the holding company count, and entity owners must be organized in the United States.
What changed from the old rule
Before March 2026, lawful permanent residents counted on the same side of the line as citizens. SBA's own 7(a) borrower form, Form 1919 (revised September 2020 and still the current form), says a business with foreign ownership may be eligible if it is "at least 51% owned and controlled by U.S. citizens and/or those who have LPR status." Procedural Notice 5000-876626 replaced the section of SBA's rulebook titled "Businesses Owned by Non-U.S. Citizens" and the definition of an Ineligible Person. Until SBA revises Form 1919 and the 504 form, Form 1244, lenders must attach a supplemental certification that the applicant meets the new standard.
How lenders apply it
The test looks back six months. Under the notice, a business is ineligible if an Ineligible Person held any direct or indirect ownership during the six months before SBA issues the loan number, unless that person fully divested before the number was issued.
Take a café owned by four partners: three U.S. citizens with 30% each and a green card holder with 10%. Under the old rule the café could apply. Today it cannot, unless the 10% partner sells the whole stake before SBA issues a loan number. Selling down to 1% does not work, because any share is disqualifying. Owners in this spot should have a business attorney structure the sale.
Other details from the notice:
- Timing. The rule applies to delegated loans given an SBA loan number on or after March 1, 2026 and to non-delegated applications that reached SBA's review status on or after that date. Applications with permanent resident owners that reached that status by 11:59 p.m. Eastern on February 28, 2026 were still processed.
- Existing loans. The notice does not reopen loans approved before March 1, 2026. When a lender services an existing loan and substitutes a new owner or guarantor, that new person may not be an Ineligible Person.
Microloans and surety bonds followed
On March 9, 2026, SBA announced that the citizenship standard would also apply to its Microloan and Surety Bond programs. The SBA news release quotes Administrator Kelly Loeffler saying "the limited resource of SBA financing must prioritize American citizens." For microloans, Policy Notice 5000-877232 took effect April 1, 2026. The rule governs SBA microloan funds. Some nonprofit lenders also run loan programs with their own eligibility rules, so ask each one which program you would be in. Our microloans guide explains how those intermediaries work.
How many borrowers it touches
SBA's own count is about 4% of approvals. The same March 9 release says SBA approved 3,358 loans in fiscal year 2025 to businesses owned in part by lawful permanent residents, out of roughly 85,000 total approvals. That figure counts only businesses with green card holder owners; SBA has not published a total for every category of owner the rule now excludes.
For scale, SBA reported that in fiscal year 2026 the 7(a) program approved 56,130 loans totaling $32.4 billion and the 504 program approved 6,075 loans totaling $7.1 billion (SBA, November 2, 2026). SBA has not broken out how much of any year-over-year change came from the citizenship rule.
A second change on the same date: no more SBSS score
March 1, 2026 also ended SBA's use of the FICO SBSS score to screen 7(a) Small loans. Under Procedural Notice 5000-876777, lenders now underwrite those loans with their own credit analysis, require a debt service coverage ratio of at least 1.10 on a historical or projected basis, and review the two most recent months of operating account activity. Our guide to SBA loans with a 650 credit score covers the underwriting change in detail.
Where the rule stands in November 2026
The rule is in force and is now part of SBA's main rulebook. SBA's Information Notice 5000-880695 says SOP 50 10 8.1, effective October 1, 2026, integrates Policy Notice 5000-876441 and Procedural Notice 5000-876626.
Two federal actions have followed:
- On July 1, 2026, the Government Accountability Office concluded in decision B-338157 that the February 2026 notices are a "rule" under the Congressional Review Act, which means SBA was required to submit them to Congress. GAO's finding does not by itself suspend the rule.
- On July 23, 2026, Rep. Nydia Velázquez introduced H.J. Res. 207 to disapprove the notices. Its last recorded action is referral to the House Committee on Small Business.
Until SBA changes its SOP or Congress or a court acts, plan around the rule as written.
Options outside SBA
The citizenship rule applies to SBA-guaranteed loans only. Banks, credit unions, CDFIs and online lenders set their own eligibility for loans they make without an SBA guarantee. Federal guidance lets them weigh immigration status: a June 2026 CFPB statement notes that Regulation B says "A creditor may take the applicant's immigration status into account." So expect questions about residency and how long you plan to stay, but not a blanket ban.
Places to look:
- Community development financial institutions (CDFIs). The Treasury's CDFI Fund publishes the list of certified CDFIs, and the Opportunity Finance Network runs a CDFI Locator for its members. DreamSpring, for example, says in its FAQ that applicants need a Social Security number or an ITIN, and it lends in 27 states.
- Credit unions. Some run programs for members without a Social Security number. New York's Neighborhood Trust Federal Credit Union says on its ITIN page that it offers business loans and lines of credit to ITIN holders at the same prices and rates as other members.
- Conventional bank loans. A bank can still lend to a business with a green card holder owner on its own balance sheet. The loan will not carry an SBA guarantee, so its terms come entirely from the bank's own credit policy.
- Online lenders and other private financing. Term loans, lines of credit, equipment financing and invoice factoring are not tied to SBA rules. They can cost much more, so compare total cost before signing.
Green card holders who are partway through an SBA application can see what non-SBA options you qualify for on Loanistry while they sort out ownership. ITIN holders face a narrower market; our ITIN business loans guide lists lenders that say they accept ITINs.
What to do if your business is affected
- Map every owner. List direct and indirect owners and SBA-required guarantors, with each person's citizenship and principal residence. One ineligible owner, at any percentage, blocks the loan.
- Check the six-month window. If an ineligible owner left recently, confirm the full divestiture happened before your lender requests the SBA loan number.
- Get legal advice before restructuring. A sale of shares to fit the rule has to be real and complete. Ask a business attorney, not just the lender.
- Price a non-SBA loan in parallel. Compare the rate, fees and term against what the SBA loan would have cost. Loanistry can show you what you qualify for across loan types.
- For citizenship as a long-term route, read the requirements in USCIS's citizenship and naturalization overview and its Policy Manual, which set how long a permanent resident must wait before applying.
Sources
- SBA: Procedural Notice 5000-876626, Revised Applicant Ownership, Citizenship, and Residency Requirements for 7(a) and 504 Loans, checked November 2026
- SBA: News Release 26-35, SBA Bans Foreign Nationals from Accessing SBA-backed Loans, checked November 2026
- SBA: Policy Notice 5000-877232, Microloan Program Citizenship Requirements, checked November 2026
- SBA: Procedural Notice 5000-876777, Sunset of SBSS Score, checked November 2026
- SBA: Information Notice 5000-880695, Issuance of SOP 50 10 8.1, checked November 2026
- SBA: SBA Fuels Main Street Growth with $100 Billion Delivered in FY26, checked November 2026
- SBA: Form 1919, 7(a) Borrower Information Form, checked November 2026
- GAO: Decision B-338157, checked November 2026
- GovInfo: H.J. Res. 207, checked November 2026
- Federal Register: CFPB Statement on Ability To Repay and Immigration Status, checked November 2026
- CDFI Fund: CDFI Certification, checked November 2026
- Opportunity Finance Network: CDFI Locator, checked November 2026
- DreamSpring: FAQ, checked November 2026
- Neighborhood Trust Federal Credit Union: ITIN, checked November 2026
- USCIS: Citizenship and Naturalization, checked November 2026