Original Date Announced

The U.S. Small Business Administration (SBA) released an updated version of the Standard Operating Procedure (SOP) for the Lender and Development Company Loan Programs with Technical Updates, which contains SBA’s loan origination policies and procedures governing the 7(a) and 504 loan programs. Among other things, the updates limit SBA financing to “businesses with 100% direct and/or indirect owners and SBA-required guarantors . . . that are U.S. citizens, U.S. Nationals, or who are Lawful Permanent Residents” and meet certain requirements.

Under a version of the manual from November 15, 2023, the SBA had previously provided financial assistance to businesses that are at least 51% owned and controlled by persons who are not U.S. citizens, provided that such persons are lawful permanent residents and meet certain requirements.

Trump 2.0 [ID #2121]

Subsequent Trump and Court Action

2025.12.19 SBA Policy Notice 5000-872050 - Update to Citizenship and Residency Requirements

The SBA announced revisions to the SOP for the Lender and Development Company Loan Programs with Technical Updates. The revisions add an exception to the SBA citizenship and residency eligibility requirement described above by allowing a borrower to have up to 5% ownership by (1) individuals who are not U.S. citizens, U.S. nationals, or lawful permanent residents (LPRs) and who are not "Ineligible Persons" but are instead foreign nationals living abroad; (2) U.S. citizens, U.S. nationals, or LPRs whose principal residence is outside of the United States; and (3) noncitizens with conditional LPR status. The revisions also expand the definition of “Ineligible Person” to include foreign entities and individuals with principal residence in or citizenship in China and Hong Kong.

Subsequent Trump and Court Action

2026.02.02 SBA Policy Notice 5000-876441 - Update to Citizenship and Residency Requirements and Recission of PN 50000-872050

The SBA announced that, as of March 1, 2026, it is requiring that "100% of all direct and/or indirect owners of a small business [loan] applicant be U.S. Citizens or U.S. Nationals who have their Principal Residence in the United States, its territories, or possessions." Additionally, lawful permanent residents will not be eligible to own any percentage interest in an Applicant/Borrower, Operating Company, or Eligible Passive Company.

The notice rescinds SBA Procedural Notice 500-872050, the policy action above, removing the narrow exception that allowed a borrower to have up to 5% ownership held by certain foreign nationals living abroad, U.S. citizens, U.S. nationals, or lawful permanent residents whose principal residence was outside the United States, and conditional LPRs.