Official Source
5000-876441
On This Page
Overview#
On February 2, 2026, the SBA issued Policy Notice 5000-876441, making major changes to citizenship and residency requirements for 7(a) and 504 loan programs. This notice rescinds Procedural Notice 5000-872050 and eliminates previous ownership exceptions.
Key Changes#
Legal Permanent Residents No Longer Eligible#
Effective March 1, 2026, Legal Permanent Residents (LPRs/green card holders) will not be eligible to own any percentage interest in:
- The Applicant/Borrower
- Operating Companies (OC)
- Eligible Passive Companies (EPC)
This is a significant change from previous policy that allowed LPR ownership.
5% Exception Removed#
The notice rescinds Procedural Notice 5000-872050, removing the narrow exception that allowed a Borrower to have up to 5% ownership held by:
- Foreign nationals
- U.S. Citizens with Principal Residence outside the United States
- U.S. Nationals with Principal Residence outside the United States
- LPRs with Principal Residence outside the United States
New Eligibility Requirements#
To be eligible for SBA 7(a) or 504 funding, 100% of all owners (direct and/or indirect) must be:
- U.S. Citizens, OR
- U.S. Nationals who have their Principal Residence in the United States, its territories, or possessions
Impact on Current Applications#
Pending Applications#
Any SBA loan currently being processed that has an owner who is an LPR must be approved and have an SBA loan number before March 1, 2026 to remain eligible.
Existing Loans#
The rule change does not impact borrowers who already have SBA loans. However, it would apply to future ownership changes in those businesses.
Compliance Timeline#
| Date | Action Required |
|---|---|
| February 2, 2026 | Notice published |
| March 1, 2026 | New requirements effective |
| Before March 1, 2026 | LPR-owned applications must receive SBA loan number |
What This Means for Borrowers#
Business owners who are Legal Permanent Residents will need to:
- Complete naturalization to become U.S. Citizens before applying, OR
- Transfer ownership to qualifying U.S. Citizens or U.S. Nationals, OR
- Seek alternative financing outside SBA programs
Effective Date#
This notice is effective March 1, 2026.
About the Author
VerSquare Editorial Team
The VerSquare editorial team provides insights, guides, and analysis for business buyers, sellers, and advisors navigating M&A transactions.
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