SBA Citizenship Rules for 7(a) and 504 Loan Eligibility in 2025

Breaking Down the SBA’s New 2025 Citizenship Requirements for 7(a) and 504 Loans

As of March 7, 2025, the SBA has officially rolled out one of the most significant policy changes in years—tightening citizenship requirements for businesses seeking SBA-backed 7(a) and 504 loans.

This change is especially important for business owners, brokers, and financial professionals navigating the SBA lending process. Understanding the new eligibility standards will save time, prevent deal-killers, and ensure compliance from day one.

What’s Changed?

Previously, small businesses could qualify for SBA loans even if up to 49% of the ownership was held by foreign investors. That flexibility is gone.

Under the new policy:

• Only businesses that are 100% owned by U.S. Citizens, U.S. Nationals, or Lawful Permanent Residents (LPRs) are eligible for SBA 7(a) and 504 loans.
• No foreign investors are allowed, even if they own a minority share.
• Applicants must certify that none of the beneficial owners are ineligible persons.
• Lenders are required to verify and enter at least 81% of beneficial ownership data into the SBA’s E-Tran system to confirm borrower eligibility.

Who Is Now Ineligible?

According to SBA guidelines, the following groups cannot own any portion of a business applying for SBA 7(a) or 504 loans:

• Foreign nationals
• Individuals granted asylum
• Refugees
• Visa holders
• DACA recipients
• Undocumented immigrants

Even if someone in one of these categories is a minority partner or silent investor, their ownership will disqualify the entire business.

What Lenders Must Do Now

SBA lenders are now required to:

1. Include borrower certifications in the loan application.
2. Collect alien registration numbers for any LPR owners.
3. Confirm an LPR’s status with USCIS using SBA verification procedures.
4. Certify in E-Tran that no beneficial owner is ineligible.

These steps must be followed until the SBA formally updates its application forms. Lenders are responsible for making sure this certification process is completed and documented before a loan is submitted for approval.

The Impact on Borrowers

This policy change has immediate implications for business owners and loan applicants:

• If your business has even 1% ownership by an ineligible person, you cannot receive SBA financing.
• Businesses structured with silent partners or outside investors must revisit ownership or seek alternative funding routes.
• The burden of proof now falls on both the applicant and the lender to show compliance.

For small business owners who’ve never run into these requirements before, it’s a big shift. Many are being caught off guard—especially startups or businesses with diverse partnership structures.

Why Did the SBA Make This Change?

According to SBA Administrator Kelly Loeffler, the reform is part of a broader initiative to prioritize U.S. citizens and permanent residents in access to federal funding programs. The change also aligns SBA procedures more closely with federal immigration compliance policies.

Whether you agree with the policy or not, this is now a non-negotiable eligibility standard for any business looking to secure an SBA loan moving forward.

What Should Business Owners Do?

If you’re planning to apply for an SBA loan, here’s how to get ahead of the new rule:

1. Audit your ownership structure
   Identify all individuals or entities with direct or indirect ownership—whether they own 1% or 99%.
2. Verify immigration status for all owners
   Ensure that every owner is either a U.S. citizen, U.S. national, or lawful permanent resident. Gather documentation like passports or green cards before applying.
3. Reorganize ownership if needed
   If your current structure includes ineligible owners, consider restructuring before applying or exploring alternative financing solutions.
4. Communicate early with your lender
   Let your lender know your ownership breakdown up front, so they can advise you properly and avoid delays later in the process.

Final Thoughts

This policy is one of the most impactful changes to SBA lending in recent years. While it may limit access for some business owners, it also streamlines SBA funding toward those who meet strict residency and citizenship criteria.

Brokers, lenders, and applicants alike must now treat ownership status as a critical eligibility factor, just like credit, time in business, or annual revenue.

Have questions about the SBA loan process or how this policy affects your business? Contact us today—we’re here to help you navigate the new landscape and find the best funding options available.