New Eligibility Rules for SBA Loans
The new eligibility rules set by the Trump administration, which prevent non-U.S citizens from accessing Small Business Administration (SBA) loans, are expected to lead more borrowers to seek capital from nonbank lenders. These revised rules, which took effect recently, restrict financing from the SBA’s 7(a) and 504 loan programs to companies that are 100% owned by U.S. citizens or U.S. nationals. This means that firms with any level of ownership by foreign persons or even lawful permanent residents — i.e., Green Card holders — are now ineligible to apply for these loans.
Implications for Alternative Lenders
According to industry experts, these new changes will likely see an increase in volume for alternative small-business lenders. Adam Benowitz, CEO of VOX Funding, commented on the potential impact of these rules stating, “What I think it could do is add more volume for alternative small-business lenders. When entrepreneurs need capital, they need capital. You need to be there to solve it for them.”
In the same vein, Ben Johnston, COO of New York-based small-business lender Kapitus, believes that his company’s non-SBA options will likely see more interest due to the SBA’s eligibility revisions. The SBA’s programs offer lower rates and longer borrowing terms than most loans, making them particularly attractive to early-stage entrepreneurs. However, these benefits are now out of reach for non-U.S citizens and green card holders.
Impact on Lending Activity
The restrictive trend appears to have already impacted lending activity. Lending in the agency’s flagship 7(a) loan guarantee program declined by 18% in the first five months of the 2026 fiscal year. This follows the implementation of a rule in March 2025 that reduced access to businesses with foreign ownership but still allowed participation by lawful permanent residents.
Benowitz suggested that the eligibility changes are having a significant impact in the small-business marketplace. This is unsurprising given that an estimated 5%-15% of the SBA’s lending volume has historically gone to immigrant owners. “Immigrants are natural entrepreneurs,” Benowitz said. “It’s hard to tell what the effect [of the new rules] will be since they went into effect yesterday, but it’s certainly going to be profound.”
Government’s Stand and Backlash
Maggie Clemmons, SBA spokesperson, said in a statement that the Trump administration is “committed to driving economic growth and job creation for American citizens.” The SBA is ensuring that every taxpayer dollar entrusted to this agency goes to support U.S. job creators and innovators.
However, this move has sparked criticism from Democratic lawmakers who believe that these restrictions will increase compliance burdens for lenders while limiting job-creation efforts. In a letter to SBA Administrator Kelly Loeffler, they wrote, “Instead of denying more American small businesses access to necessary affordable capital, we should be working together to strengthen the SBA’s capital access programs and increase financing opportunities for more small businesses in order to improve our local communities and national economy.”
Effect on SBA Lenders
Nimi Natan, CEO of the SBA lending subsidiary of the Gulf Coast Bank and Trust Co., said his team has had to walk away from a handful of deals due to the SBA’s new eligibility requirements. While many SBA lenders focus on serving larger, more established businesses, lending to early-stage entrepreneurs, including lawful permanent residents, is more risky. “SBA is an imperfect program for that,” Natan said.
Overall, while the new rules aim at driving economic growth for American citizens, they also limit opportunities for immigrant entrepreneurs who have been significant contributors to the U.S. economy. As the situation evolves, it will be interesting to see how these changes shape the small business lending landscape in the U.S.
Source: Here
