SBA Loan Restrictions for Non-Citizens: What Business Buyers Need to Know

Policy Context Disclaimer

This article reflects SBA policy guidance, including SOP 50 10 8 and related procedural notices, as in effect at the time of writing. SBA eligibility and underwriting outcomes remain subject to lender interpretation, credit policy, and deal-specific facts.

Introduction

For business buyers seeking to use an SBA 7(a) loan to finance their acquisition, understanding the restrictions that apply to non-citizens is crucial. While SBA loans are typically available to U.S. citizens, there are specific rules and restrictions that affect non-citizens seeking financing. SBA financing is generally limited to businesses owned and controlled by U.S. citizens, U.S. nationals, or lawful permanent residents, subject to narrow exceptions under current SBA guidance and lender verification.

This article outlines SBA loan restrictions for non-citizens and what business buyers need to know when considering SBA financing for their business acquisition.

Who Is Eligible for SBA Financing as a Non-Citizen?

The SBA requires that applicants for SBA 7(a) loans be U.S. citizens, U.S. nationals, or lawful permanent residents (green card holders). However, the eligibility for non-citizens depends on several factors, including their immigration status and the nature of their legal residency. Here’s a breakdown of who qualifies:

1. Lawful Permanent Residents (Green Card Holders)

Lawful permanent residents (green card holders) may be eligible for SBA loans provided they meet all SBA eligibility requirements and their status can be verified through required documentation. LPRs must meet all standard SBA eligibility criteria, including demonstrating sufficient experience, creditworthiness, and financial capability to service the loan.

Key Points for Green Card Holders:

• Must submit a valid green card (Form I-551) as proof of residency.
• Must be legally residing in the U.S. and fulfill the SBA’s size standards, among other requirements.

2. U.S. Nationals

Individuals born in U.S. territories such as American Samoa or Swains Island are considered U.S. nationals. They are also eligible for SBA loans and do not need to be U.S. citizens. Non-citizen nationals are subject to the same requirements as U.S. citizens for SBA loan applications.

3. Non-Immigrant Visa Holders

Non-citizens holding temporary visas, such as those on work or student visas, are not eligible for SBA financing. To qualify for an SBA loan, all owners and required guarantors must be U.S. citizens, U.S. nationals, or lawful permanent residents. Temporary visa holders and other non-immigrant statuses are not eligible.

4. Other Foreign Nationals

If an individual is not a U.S. citizen, green card holder, or U.S. national, they generally do not qualify for SBA 7(a) financing. This includes individuals on tourist visas, temporary work visas, or other non-immigrant statuses. The SBA requires that a business owner or buyer have permanent U.S. residency.

Categorically Ineligible Persons

Certain individuals remain categorically ineligible for SBA financing, including undocumented individuals, nonimmigrant visa holders, refugees, asylees, DACA recipients, entities organized outside the United States, individuals in restricted jurisdictions, and any person or entity on OFAC sanctions lists.

SBA Loan Requirements for Non-Citizens

For non-citizens eligible for SBA financing, there are a few additional requirements and considerations that business buyers need to understand:

1. Proof of U.S. Legal Status

Non-citizens applying for an SBA loan must provide documentation verifying their legal U.S. status. This typically includes:

• A valid green card for lawful permanent residents.
• A copy of the U.S. passport for U.S. nationals.
• Evidence of lawful permanent resident status, typically Form I-551 (green card), or other SBA-accepted documentation as verified through USCIS procedures.

2. Ownership and Control Rules

The SBA has specific rules governing ownership and control in SBA-backed acquisitions. Non-citizens must meet the SBA’s control requirements, meaning the borrower (or business owner) must be actively involved in the day-to-day operations of the business.

• SBA loans generally require that ownership and control rest with eligible persons under SBA rules, subject to limited exceptions permitted under current SBA guidance.
• All owners must meet SBA active business requirements, and the business may not be structured as a passive investment under SBA rules.

Limited Foreign Ownership Exception

Under updated SBA guidance, a business may have up to 5% aggregate ownership held by certain otherwise non-eligible individuals. This exception is limited, non-controlling, and does not permit management authority or operational involvement.

3. Additional Documentation for Non-Citizens

Non-citizens may be required to submit additional documentation to the SBA or the lender, including:

• Proof of financial resources and the ability to meet equity injection requirements (a personal stake in the business).
• Tax returns or financial statements to demonstrate the ability to repay the loan.
• Employer Identification Number (EIN) if they are a business entity.

This documentation ensures that the applicant is a viable borrower and adheres to the SBA’s requirements for financial responsibility.

4. USCIS Compliance

For non-citizens, the U.S. Citizenship and Immigration Services (USCIS) must verify their status as lawful residents of the U.S. SBA lenders are required to verify lawful permanent resident status through USCIS, which may include submission of Form G-845 as part of the lender’s verification process. This is especially important if the applicant is a foreign national or holds any status other than a green card holder or U.S. national.

Special Considerations for Non-Citizens Seeking SBA Loans

For buyers who are lawful permanent residents or U.S. nationals, there are additional verification steps and considerations during the SBA loan process:

1. Lender Discretion

While the SBA provides guidelines, individual lenders may interpret the rules slightly differently or have internal policies. Some lenders may have more strict requirements when it comes to working with non-citizens, so it is important to communicate directly with your lender about their specific requirements and any documentation you need to provide.

2. Complexity of the Process

The SBA loan process for non-citizens can be more complex than for U.S. citizens. Buyers should be prepared for potential delays due to additional verification steps. It is advisable to work with an experienced SBA advisor who can assist with compiling the necessary documentation and guiding you through the loan application process.

3. Equity Injection

SBA rules require that business buyers inject their own funds into the business as part of the deal. Non-citizens may face additional scrutiny when it comes to demonstrating their ability to meet this equity injection requirement. Documentation proving the availability of funds may be required, especially if the non-citizen is bringing foreign capital into the U.S.

Buyers with trusts, minority investors, or international family ownership structures should raise these issues with lenders early to avoid underwriting delays or disqualification.

Working with PCA to Navigate SBA Financing for Non-Citizens

At Pioneer Capital Advisory (PCA), we specialize in guiding both citizen and non-citizen buyers through the SBA loan process. If you are a non-citizen business buyer looking to secure SBA financing for a business acquisition, we can help you navigate the eligibility requirements, gather the necessary documentation, and work with the right lenders to increase your chances of approval.

Our advisory services include:

• Eligibility assessment: Helping determine whether ownership and guarantor structures align with SBA citizenship and residency requirements.
• Loan application guidance: Helping you prepare and submit a complete SBA loan application.
• Lender matching: Connecting you with lenders that understand the needs of non-citizen borrowers.
• SBA compliance guidance: Helping buyers understand SBA eligibility rules and lender documentation requirements.

Conclusion

SBA 7(a) financing is available to businesses that meet SBA citizenship and residency requirements, with ownership and control generally held by eligible persons, subject to limited exceptions under current SBA guidance. Eligible individuals are limited to U.S. citizens, U.S. nationals, and lawful permanent residents whose status can be verified. With proper documentation and lender verification, lawful permanent residents and U.S. nationals can navigate the SBA loan process and pursue a business acquisition.

If you are a non-citizen buyer looking to secure an SBA loan, consider working with Pioneer Capital Advisory (PCA) to ensure a smooth and successful financing journey.

General Disclaimer

The information contained in this article is provided for general informational purposes only and is not intended to constitute legal, tax, financial, or other professional advice. Readers should consult their own legal, tax, and professional advisors regarding their specific circumstances.

SBA guidelines, rules, and interpretations are subject to change from time to time. As a result, information that is accurate as of the date of publication may not reflect subsequent updates or policy changes. If you are reading this article after its publication date, certain information may no longer be fully current.

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