Small Business Loan Policies and Immigrant Entrepreneurs

A significant shift in the Small Business Administration’s (SBA) lending policy has created challenges for some entrepreneurs. Sayuri Tsuchitani, a Japanese immigrant, faced one of these challenges. Previously, she successfully opened a Japanese head spa with an SBA loan. However, under the new policy, she does not qualify for loans due to her status as a lawful permanent resident, not a U.S. citizen.

Impact of Policy Changes

SBA’s policy now exclusively supports businesses entirely owned by U.S. citizens. This change is part of broader moves to limit program access for non-citizens. The SBA had already restricted lending options for some immigrants, primarily focusing on those living legally and permanently in the U.S.

“It was a bit of a shock to the system,” said Eda Henries, who assists small businesses with fundraising.

Despite permanent residents paying U.S. taxes, the SBA now treats them as “foreign nationals.” Agency head Kelly Loeffler stated that SBA’s loans are meant for citizens, citing an audit that halted a significant loan to a business largely owned by an immigrant without legal status.

Importance of Immigrant Entrepreneurs

Research shows immigrants are more likely to start businesses than native-born Americans. While foreign-born individuals comprise 15% of the U.S. population, they run 20% to 25% of the businesses. A recent study from the National Foundation for American Policy indicates immigrants and their children established two-thirds of U.S. startups valued over $1 billion.

Historically, 4% of SBA loans supported businesses run by permanent residents. Although a small percentage, these funds have been transformative for the recipients.

Alternative Financing Challenges

Without SBA loans, immigrant entrepreneurs face hurdles finding alternative financing. Private banks often hesitate to lend to small firms. The new policy might drive business owners toward riskier financial options like merchant cash advances.

Some Democrats in Congress are working to reverse this policy. Leaders such as Senator Ed Markey and Representative Nydia Velazquez have proposed a bill to restore loan eligibility for legal permanent residents.

Current Landscape

The policy change is already affecting business operations. Lengthened loan verification processes can disrupt entrepreneurs. Henries noted cases where potential deals stalled as lenders reassessed applicants’ citizenship statuses.

“I have clients that were in the middle of underwriting — we’re in the process of doing deals,” Henries explained, highlighting the uncertainty now faced by many business owners.

Some affected business owners avoided public discussion, cautious of attracting attention to their immigration status.

Cristina Foanene, now a naturalized citizen, reflects on the support her business received through SBA loans. Her journey highlights the positive impact of immigrant entrepreneurs on the U.S. economy.