New US rule bars green card holders from business loans; EB-5 safe: Decoded

New US policy disqualifies businesses with any green card holder ownership from SBA-backed loans, triggering criticism from lawyers and Democratic lawmakers

A new US policy taking effect on March 1 will bar green card holders from receiving business loans backed by the US Small Business Administration (SBA), a move that affects both existing and new borrowers.

 

The restriction applies across the board and is not limited to fresh applications. Any business linked to a loan where a green card holder has an ownership stake, even a small one, will be disqualified from SBA-backed funding.

 

What the restriction covers

 

The rule applies to multiple layers of ownership and participation in a business. It includes:

 

• Borrowers applying for SBA-backed loans

 

• Operating companies connected to the loan

• Eligible passive companies

• Both direct and indirect ownership interests

 

“Legal permanent residents (LPRs), commonly referred to as green card holders, who relied on the money to invest in the business will be the hardest hit by the new SBA rule. Minority shareholders, family-run firms, or immigrant-founded startups are particularly exposed,” said Charles Kuck, an Atlanta-based immigration attorney, responding to queries from Business Standard.

 

He said even a non-controlling ownership stake held by a green card holder could now make a business ineligible. “The ridiculous rules will also mean that a small, non-controlling ownership stake held by a green card holder will apparently make a business ineligible for SBA-backed loans,” Kuck said.

 

What the policy requires

 

The policy notice, issued last week, requires 100 per cent of all direct and indirect owners of a loan applicant to be US citizens or US nationals residing in the United States or its territories.

 

The change reverses earlier flexibility and aligns with US President Donald Trump’s ‘America First’ approach, tightening access to federal credit programmes for non-citizens, even those with permanent residency.

 

How SBA loans are commonly used

 

SBA-backed loans are a key source of financing for small businesses across the country. The agency’s two main lending programmes are widely used:

 

• 7(a) loans for working capital, inventory, refinancing, and equipment

• 504 loans for purchasing commercial real estate and heavy machinery

 

In California’s Central Valley alone, the top 20 SBA lenders guaranteed loans worth $115.6 million during the period referenced by lawmakers, showing how central the programme is to local business financing.

 

Who is not affected

 

According to Kuck, some categories of foreign nationals will not be affected by the change.

 

• EB-5 investors, whose businesses generally do not rely on SBA funding

• Individuals on H-1B or L-1 visas, who are not eligible borrowers under SBA rules in the first place

 

Why the rule has drawn criticism

 

Asked why the US government was limiting SBA loans to citizens despite green card holders being lawful residents and taxpayers, Kuck said the move reflected “jingoism, nativism, and jealousy”.

 

Democratic lawmakers have also criticised the policy shift. Senate Small Business Committee ranking member Edward Markey of Massachusetts and House Small Business Committee ranking member Nydia Velázquez of New York said the change was hostile to immigrant entrepreneurs and inconsistent with the SBA’s mandate.

 

They noted this was the second reversal of SBA citizenship rules in under two months. In December, the agency had said it would allow up to 5 per cent foreign national ownership while excluding Chinese citizens. That position has now been fully withdrawn.

 

In a joint statement, the lawmakers said the policy runs against the purpose of the agency. “The Trump administration is stoking the flames of hatred, spreading fear and confusion among immigrants and small business owners,” said Markey and Velázquez. “Rather than support hard-working legal immigrants to start or expand a business, the Trump SBA is choosing hatred by barring green card holders from receiving an SBA loan.”