Small businesses will suffer under SBA’s new credit restrictions

The Small Business Administration’s recent decision to bar noncitizen permanent residents of the U.S. from receiving federally backed small‑business loans is not just misguided policy. It is a self‑inflicted economic wound — one that will restrict credit, suppress job creation and undermine the very market stability the SBA is supposed to support.

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In today’s tight credit environment, SBA 7(a) and 504 loans are the primary mechanism through which small businesses access reasonably priced capital. Banks and nonbank lenders rely on the SBA guarantee to extend credit without taking on disproportionate risk. Remove that guarantee, and lending to small firms — the backbone of the American economy — grinds to a halt, especially in regions of the country with large immigrant populations like New York, Arizona, Florida and Texas. Key sectors that drive the economy — manufacturing, hospitality, construction — will be disproportionately and unnecessarily harmed. 

As someone who works daily with business owners across New York and the country to secure financing, I can say plainly: SBA loans are the only functioning channel left for many borrowers. When the agency changes eligibility rules, the consequences are immediate and far‑reaching.

This is not the first time recent SBA actions have distorted the market. Last year, the agency prohibited lenders from refinancing merchant cash advances — the high‑cost, short‑term products that have trapped thousands of businesses in cycles of debt. That decision eliminated the only viable path for owners to escape predatory financing. I am currently advising a business owner who is now weighing both business and personal bankruptcy because the SBA removed the refinancing option that would have stabilized operations.

But the new rule targeting permanent residents is even more economically damaging. These are legal, tax‑paying residents who employ millions of Americans and contribute billions to local economies. In New York City alone, nearly half of all businesses are immigrant‑owned. Over half of Hispanic-owned businesses nationwide are immigrant owned, often by permanent residents. Excluding them from SBA programs does not protect taxpayers — it destabilizes the very enterprises that generate tax revenue, create jobs and keep commercial corridors alive. 

The impact is not theoretical. I am currently working on an SBA loan for a client who owns several restaurants across New York City, employing more than 100 people. My client is a permanent resident, and their spouse is a U.S.-born Army veteran. Their loan was scheduled to close at the end of March. Now, because of an arbitrary March 1 cutoff, their lender is scrambling to salvage the deal. If it collapses, the consequences will be felt not only by my client but by every employee on their payroll and every vendor in their supply chain.

This is the definition of regulatory overreach: a sweeping policy change issued without warning, without economic justification, and without regard for the downstream effects on businesses, workers, and local economies.

If the goal is to reduce fraud, the SBA should strengthen verification processes — not eliminate entire categories of lawful borrowers. Permanent residents undergo extensive vetting, pay taxes and operate under the same legal obligations as citizens. Treating them as a risk category is not only economically irrational; it is inconsistent with decades of federal policy and the basic principles of a market‑driven economy.

The SBA should reverse this rule immediately. And policymakers — including state attorneys general — should challenge it aggressively. America’s small‑business economy is already under strain from inflation, high interest rates and tightening credit. The last thing we need is a federal agency tasked with supporting economic growth making capital even harder to access for the entrepreneurs who keep this country working.

This is not a partisan issue. It is a matter of economic common sense.