The U.S. Small Business Administration (SBA) has issued a new policy that restricts its flagship 7(a) and 504 loan programs to businesses that are 100% owned by U.S. citizens or U.S. nationals whose principal residence is in the United States, its territories, or possessions. The change, effective March 1, 2026, eliminates any ownership stake by legal permanent residents (green card holders) or other non-citizens.
The policy notice (Control No. 5000-876441), published February 2, 2026, and signed by SBA Administrator Kelly Loeffler, revises Standard Operating Procedure (SOP) 50 10 8. It explicitly states that “100% of all direct and/or indirect owners of a small business applicant” must meet the citizenship and residency criteria. It also rescinds a December 2025 procedural notice (5000-872050) that had allowed up to 5% ownership by certain foreign nationals, U.S. citizens/nationals living abroad, or legal permanent residents (LPRs) whose principal residence was outside the U.S.
Key provisions of the policy
• Applies to all 7(a) and 504 loan applications processed on or after March 1, 2026.
• Legal permanent residents may not own any percentage—direct or indirect—in an applicant business, operating company, or eligible passive company.
• The rule cites consistency with 13 C.F.R. § 120.100 and Executive Order 14159 (“Protecting the American People Against Invasion”).
An SBA spokesperson told multiple outlets: “The Trump SBA is committed to driving economic growth and job creation for American citizens—which is why, effective March 1, the agency will no longer guarantee loans for small businesses owned by foreign nationals.”
The change does not prevent non-citizens from owning or operating businesses in the United States or from seeking conventional commercial loans from private banks. It only affects eligibility for SBA-guaranteed financing.
Background and prior policy
Until this notice, SBA rules had long permitted majority U.S. citizen ownership with limited exceptions for non-citizen stakes. A December 2025 procedural notice briefly expanded flexibility to a 5% threshold for certain non-citizens before the current policy reversed course and imposed the stricter 100% requirement.
Impact on Ohio small businesses
This is a federal policy that applies uniformly nationwide, including in Ohio. Ohio-based lenders, Certified Development Companies (CDCs), and small businesses seeking 7(a) or 504 loans after March 1 must ensure 100% qualifying U.S. citizen/national ownership. Businesses with any non-citizen ownership stake—even a small passive investment—will be ineligible.
Ohio small business owners, lenders, and CDCs should:
• Review current ownership structures before submitting applications.
• Consult their local SBA field office or Lender Relations Specialist with questions (contact information is available on the SBA website).
• Note that loans assigned an SBA loan number before March 1, 2026, remain under the prior rules.
No Ohio-specific statutes conflict with the federal requirement; compliance is governed by federal SBA regulations and SOP 50 10 8.
Reactions
Supporters view the policy as a straightforward prioritization of American citizens in the use of taxpayer-backed loan guarantees. Critics, including some members of Congress, have called the move discriminatory and economically damaging to immigrant-owned businesses that employ U.S. workers. All parties agree the change is now official federal policy.
The full policy notice is publicly available on the SBA website. Small businesses in Ohio or elsewhere seeking clarification should rely on the official SBA document and direct communication with SBA personnel rather than secondary sources.
