Understanding the SBA’s New Citizenship Verification Requirements for Loans in 2025

In March 2025, the U.S. Small Business Administration (SBA) implemented significant changes to its loan eligibility criteria, focusing on the citizenship status of business owners. These reforms, driven by Executive Order 14159, aim to ensure that SBA-backed loans are accessible exclusively to businesses entirely owned by U.S. citizens, U.S. nationals, or lawful permanent residents (LPRs). Exit Strategies Group+1Exit Strategies Group+1 Small Business Administration+3Pacific Business Sales+3naggl.org+3

For small business owners and entrepreneurs, understanding these new requirements is crucial to navigate the loan application process successfully and to ensure compliance with the updated regulations.

Key Changes in SBA Loan Eligibility

1. 100% Ownership by Eligible Individuals

Previously, businesses with up to 49% foreign ownership could qualify for SBA loans. Under the new policy, to be eligible for SBA 7(a) and 504 loans, a business must be 100% owned by individuals who are:smallbusinesslendingsource.com+1Exit Strategies Group+1 smallbusinesslendingsource.com+2Exit Strategies Group+2Exit Strategies Group+2

U.S. citizens
U.S. nationals
Lawful permanent residents (LPRs)smallbusinesslendingsource.com+1CDC Small Business+1

Any ownership stake by individuals who do not fall into these categories renders the business ineligible for SBA financing. smallbusinesslendingsource.com+2Exit Strategies Group+2Exit Strategies Group+2

2. Prohibition of Ownership by Ineligible Persons

The SBA now explicitly prohibits businesses from receiving loans if any part of the ownership is held by:

Undocumented immigrants
Visa holders
Individuals granted asylum or refugee status
Recipients of Deferred Action for Childhood Arrivals (DACA)SlidePlayer+6smallbusinesslendingsource.com+6Starfield & Smith Attorneys at Law+6 Starfield & Smith Attorneys at Law

This change aims to align SBA loan programs with federal immigration laws and policies.

3. Mandatory Citizenship Verification

Lenders are now required to verify the citizenship or LPR status of all beneficial owners of the applicant business. This involves:Magnolia Tribune+7smallbusinesslendingsource.com+7CDC Small Business+7 unitedcapitalsource.com+2CDC Small Business+2naggl.org+2

Collecting and entering at least 81% of beneficial ownership data into the SBA’s E-Tran system.
Obtaining alien registration numbers for LPRs.
Submitting USCIS Form G-845 for verification through the Sacramento Loan Processing Center. CDC Small Business CDC Small Business+4smallbusinesslendingsource.com+4Starfield & Smith Attorneys at Law+4 naggl.org+2naggl.org+2Starfield & Smith Attorneys at Law+2

These steps are crucial to ensure that only eligible businesses receive SBA-backed loans.smallbusinesslendingsource.com+1Exit Strategies Group+1

Implications for Business Owners

1. Review and Adjust Ownership Structures

Business owners must assess their ownership structures to ensure compliance with the new requirements. If any part of the business is owned by ineligible individuals, restructuring may be necessary to qualify for SBA financing.Exit Strategies Group+1Exit Strategies Group+1 Starfield & Smith Attorneys at Law+2smallbusinesslendingsource.com+2Exit Strategies Group+2

2. Impact on Business Transactions

The new rules also affect business acquisitions. Buyers using SBA loans to finance purchases must meet the citizenship criteria, potentially limiting the pool of eligible buyers and affecting the sale of businesses. Exit Strategies Group+1Exit Strategies Group+1

3. Increased Documentation and Processing Time

The additional verification steps may lead to longer processing times for loan applications. Business owners should prepare for potential delays and ensure all required documentation is accurate and complete to facilitate the process.

Steps to Ensure Compliance

To navigate the new requirements effectively, business owners should:

Audit Ownership: Confirm that all owners meet the citizenship or LPR criteria.
Gather Documentation: Collect necessary documents, such as passports or green cards, and alien registration numbers for LPRs.
Consult Professionals: Work with legal and financial advisors to understand the implications of the new rules and to restructure ownership if needed.
Communicate with Lenders: Engage with SBA-approved lenders early in the process to understand their specific requirements and to ensure all verification steps are completed.Exit Strategies Group+2CDC Small Business+2smallbusinesslendingsource.com+2 smallbusinesslendingsource.com

Conclusion

The SBA’s 2025 citizenship verification requirements represent a significant shift in the agency’s loan eligibility criteria. By mandating that businesses be entirely owned by U.S. citizens, nationals, or lawful permanent residents, the SBA aims to align its programs with federal immigration policies. For small business owners, understanding and complying with these new requirements is essential to access SBA-backed financing and to support the growth and success of their enterprises.

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