Insights

A critical policy shift affecting ownership structures, immigrant entrepreneurs, and SBA-backed financing

The U.S. Small Business Administration (SBA) has announced a significant revision to its loan eligibility requirements that will take effect on March 1, 2026. This policy change directly impacts who may own a business that seeks SBA-backed financing and represents one of the most consequential eligibility shifts in recent years.

Under the updated SBA Standard Operating Procedure (SOP), businesses applying for SBA-guaranteed loans must now be 100% owned—both directly and indirectly—by U.S. citizens or U.S. nationals. As a result, Legal Permanent Residents (LPRs), commonly known as Green Card holders, are no longer permitted to hold any ownership interest in an SBA-financed business, regardless of percentage.

For entrepreneurs, investors, and companies that rely on SBA loans as a cornerstone of their financing strategy, understanding this change—and responding proactively—is essential.

Overview of the Policy Change

Historically, SBA loan programs allowed Legal Permanent Residents to own and operate SBA-financed businesses, provided they met residency, management, and credit requirements. This made SBA loans an accessible and widely used financing tool for immigrant entrepreneurs and cross-border investors who had already established permanent legal status in the United States.

That framework will change beginning March 1, 2026.

Under the new rules:

• All ownership interests in an SBA loan applicant must be held exclusively by U.S. citizens or U.S. nationals

• Any level of ownership by an LPR—direct or indirect—renders the business ineligible

• Ownership is evaluated broadly and includes holding companies, trusts, family entities, and layered structures

Even a minimal ownership interest—such as 1% equity held by an LPR—will disqualify the application.

SBA Loan Programs Affected

The policy applies across all major SBA-guaranteed loan programs, including but not limited to:

• SBA 7(a) Loans
  Commonly used for business acquisitions, working capital, partner buyouts, and expansion

• SBA 504 Loans
  Frequently used for commercial real estate purchases and large equipment financing

• Any other SBA-backed financing products subject to SOP eligibility rules

Given the prevalence of these programs in small and mid-sized business transactions, the policy has broad implications across industries, including hospitality, retail, healthcare, logistics, and professional services.

Timing Matters: The Importance of the SBA Loan Number

One of the most critical aspects of this policy change is timing.

SBA has clarified that loan applications already issued an SBA Loan Number prior to March 1, 2026 may continue under the existing eligibility rules. However:

• Applications still in underwriting

• Deals submitted but not yet approved

• Transactions in negotiation but not formally filed

may be subject to the new citizenship-only ownership requirement if the SBA Loan Number has not been assigned before the effective date.

This creates a narrow and time-sensitive window for businesses currently pursuing SBA financing. Delays in documentation, ownership verification, or lender coordination could materially affect eligibility.

Who Is Most Impacted?

The policy change will most significantly affect:

• Legal Permanent Residents who own or plan to acquire U.S. businesses using SBA financing

• Immigrant entrepreneurs scaling businesses through SBA-backed capital

• Cross-border family ownership structures, where LPRs hold minority interests

• Investment groups with mixed citizenship ownership

• Business sellers and brokers, as buyer eligibility may change deal feasibility

In many cases, otherwise healthy and bankable transactions may become unfinanceable through SBA programs solely due to ownership composition.

Strategic Implications for Business Planning

From a strategic standpoint, this change requires business owners and investors to re-evaluate assumptions that have long been considered standard in SBA transactions.

Key considerations include:

• Whether current or planned ownership structures remain viable

• The cost and feasibility of restructuring equity

• The availability and pricing of non-SBA financing alternatives

• The impact on valuation, deal timelines, and exit strategies

Importantly, this is not merely a financing issue—it is a governance and ownership issue with long-term consequences.

Professional Guidance: How to Respond

At Elevatus Business Consultants, we recommend affected clients take the following steps:

1. Conduct an Ownership Audit
   Review all direct and indirect ownership interests, including trusts, holding entities, and family partnerships.

2. Assess Timing and Deal Status
   If pursuing SBA financing, confirm whether an SBA Loan Number has been issued or can realistically be obtained before March 1, 2026.

3. Evaluate Restructuring Options
   In some cases, ownership restructuring may be possible—but must be approached carefully with legal, tax, and compliance considerations in mind.

4. Explore Alternative Financing
   Conventional bank loans, private lending, seller financing, or hybrid structures may provide viable alternatives where SBA loans are no longer available.

5. Coordinate Early with Advisors
   Immigration status, corporate structure, financing, and tax planning are now more interconnected than ever in SBA-related transactions.

Final Thoughts

The SBA’s 2026 eligibility update marks a fundamental shift in how government-backed small business financing interacts with immigration status and ownership rights. While the stated intent is to align SBA funding more closely with U.S. citizen ownership, the practical effect is a narrower path to capital for many long-standing contributors to the U.S. small business ecosystem.

Businesses that act early, seek professional guidance, and adapt strategically will be best positioned to navigate this change successfully.