New Citizenship Requirements for SBA Loans
On March 7th, 2025 the SBA issued SBA Policy Notice 5000-865754 to comply with Executive Order 14159 regarding citizenship requirements for obtaining 7(a) and 504 loans. The new SBA policy requires all owners and shareholders of a business applying for SBA financing to be US Citizens, US Nationals, or Legal Permanent Residents (LPRs), and prohibits any ownership, including minority ownership, by non-citizens, including Green Card and Visa Holders.
Under the new requirements, SBA-backed financing is limited to businesses with 100% beneficial ownership by citizens of the U.S., U.S. Nationals, or Lawful Permanent Residents (LPRs). NO degree of beneficial ownership will be permitted for any individual not holding one of those three statuses.
These new requirements apply to both 7(a) and 504 loans and prohibit SBA from guaranteeing a loan to an applicant business that is “owned in whole or part by undocumented (illegal) aliens”. To assure compliance with this requirement, SBA has amended its procedures to require that lenders document and input into E-Tran information on at least 81% of the beneficial owners of the applicant company (as that term is defined in SOP 50 10 7.1, p. 356) and to certify in E-Tran that NO beneficial owner is an ineligible person (as that term is defined in the notice).
In addition, the loan applicant now must:
- Certify on the 7(a) and 504 application forms that none of its beneficial owners are ineligible persons
- Include a Lawful Permanent Resident’s alien registration number as applicable.
Per the notice, until SBA issues updated 7(a) and 504 loan application forms, lenders must include the above certifications as part of their SBA loan applications and must collect all applicable alien registration numbers.
The notice also states “lenders must receive verification of the status of each individual required to submit USCIS documents prior to submission of the application to SBA or, for delegated processing, prior to submission of the request for loan number”.
New SBA Loan Guarantee Fees Effective March 27th, 2025
Effective March 27th, 2005 the SBA announced new loan guarantee fees below, except for Export Working Capital Program (EWCP) and SBA Express Loans for Veterans. The new SBA fees below apply to the FY 2025 gross loan approval amount, including SBA guaranteed and guaranteed portions.
For SBA loans with a maturity date exceeding 12 months, the upfront SBA Loan Guarantee Fees are now:
- Loans of $150,000 or less: 2% of the guaranteed portion and the lender may retain no more than 25% of the fee (i.e. at least 1.5% must me remitted to the SBA.
- Loans of $150,001 to $700,000: 3% of the guaranteed portion.
- Loans of $700,001 to $5,000,000: 3.5% of the guaranteed portion up to and including $1,000,000 and 3.75% of the guaranteed portion over $1,000,000.
