File photo

Members of Congress are pushing for a reversal on new requirements for the U.S. Small Business Administration (SBA) loans to exclude green card holders, arguing the policy could restrict access to capital for small businesses across the country.

In a Feb. 24 letter to SBA Administrator Kelly Loeffler, Sen. Edward J. Markey (D-Massachusetts) and Democratic House leaders criticized the new rule barring businesses with any non-citizen ownership from participating in the programs, even if those owners lawfully reside in the United States.

“At a time when President Donald Trump’s tariff and trade policies are putting immense pressure on America’s small businesses, the SBA should be focused on reducing barriers and helping more small businesses access these two important programs,” the lawmakers wrote.

The letter was signed by House Small Business Committee Ranking Member Nydia Velázquez and leaders of the Congressional Black Caucus, Congressional Hispanic Caucus and Congressional Asian Pacific American Caucus.

“We are deeply concerned that the SBA’s unclear and shifting guidance will drive lenders and program participants to halt new originations under both programs to avoid liability, cutting off access to capital and destabilizing communities and local economies across the country,” the letter states.

Economic analysts say the rule could have broader implications because it applies not only to fully immigrant-owned companies but also to businesses with mixed ownership structures.

The requirement disqualifies any business where a lawful permanent resident owns even a small stake in the company, a structure common in partnerships, family businesses and limited liability companies.

For those firms, the policy could force owners to restructure their ownerships or turn to alternative lending sources that often carry with them higher rates or shorter repayment terms.

Experts say the industries most likely to feel the effects of the new policy include restaurant and hospitality, construction and skilled trades, health care practices, logistics and transportation companies and a range of service businesses that utilize SBA loans for real estate, equipment and working capital.

Dean Kaplan, president of the Los Angeles-based Kaplan Group, a commercial debt collection agency that specializes in business-to-business collections, echoed concerns raised by industry experts and lawmakers.

“The rule is broad because it doesn’t just affect fully immigrant-owned firms,” Kaplan said. “It sweeps in any business where a lawful permanent resident owns even 1%.”

Advocates say the change could see a major shift in small-business creation as well; Kaplan said immigrants start businesses at around 80% higher rates than native-born Americans, accounting for roughly a quarter of new firms in the United States.

Analysts say the effects of the policy will likely be reflected in several key indicators, including changes in SBA 7(a) and 504 loan approvals, application withdrawals tied to eligibility issues, delayed business expansions and employment trends in sectors that rely on SBA financing.

“SBA loans are often the only realistic long-term financing option for younger or asset-light small businesses,” Kaplan said.

Businesses affected by the new rule may seek alternatives through conventional bank loans, community development financial institutions or state and local financing programs that do not mirror the new SBA restrictions.

Cen Cal Business Finance Group Executive Director Frank Gallegos reinforced those claims, arguing that the changes would cause unnecessary strain on local businesses that include foreign ownership.

He said that the policy runs counter to the SBA’s mission of expanding opportunities for capital for growing businesses.

“That’s how I feel, this past year has been the opposite direction,” he said. “These people legally immigrate, they come here, they’re living the American dream.”

Regardless of how businesses respond, those relying on SBA loans may face changes ranging from alternative financing options to restructuring ownership to meet the new citizenship requirements.

“For mixed-ownership companies, that means they may have to choose between restructuring ownership, walking away from SBA financing, or shifting into shorter-term, higher-cost loans,” Kaplan said.

Those alternatives, however, often carry higher borrowing costs or shorter repayment terms.

“Some firms will also turn to private financing, but those options often come with shorter terms and higher effective costs than SBA-backed credit,” Kaplan said.

Kaplan said it’s likely the rule, which took effect March 1, will face scrutiny from lawmakers and the courts in the future.

“It would not be surprising to see both legal challenges and legislative interest,” Kaplan said.