SBA Citizenship Rules for 7(a) and 504 Loan Eligibility in 2025
Update from the SBA: All 7(a) and 504 loans now require 100% ownership
by U.S. Citizens, U.S. Nationals, or Lawful Permanent Residents.
Even a small percentage of foreign ownership like — 1% or less —
can now disqualify an otherwise eligible business from receiving funding.
This change is already affecting applications, so if you’re in the process of or planning to apply,
it’s critical to understand the SBA’s new rules.
Details 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 the 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 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:
- DACA recipients
- Foreign nationals
- Individuals granted asylum
- Refugees
- Undocumented immigrants
- Visa holders
Even if someone in one of these categories is a minority partner or silent investor,
their ownership will disqualify the entire business.
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.
7a Loan Details on the SBA website here
504 Loan Details on the SBA website here
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