Big change for California small businesses: No more SBA loans for non-citizens

Green-card holders no longer qualify for loans from the Small Business Administration, eliminating a longtime source of financing for immigrants that advocates say will discourage job creation and harm the economy.

The SBA limited access to its loans to U.S. citizens and nationals only starting in March, and expanded that policy to SBA-backed loans beginning in April. On top of that, any business that’s even partly owned by a permanent legal resident with a green card is no longer eligible for the loans.

California — which has the most small businesses and the largest immigrant population in the nation — could be most affected. SBA loans have been important to immigrant entrepreneurs because they typically are low-interest and available to those without an established credit history. The agency has also backed loans by private funders, providing a government guarantee for people banks may deem riskier. Now, all those loans are off the table for owners and would-be owners of restaurants, bake shops, law practices, medical clinics, taxi medallions, nail salons and more who hold green cards.

Small business owners are responsible for 99% of net new jobs in the state, according to the California Office of the Small Business Advocate. Immigrant entrepreneurs make up 40% of the state’s business community and generated $28.4 billion in income in 2023, according to GO-Biz, the governor’s office of business and economic development.

Small Business Majority, a national business advocacy group, wrote to the SBA in mid-March, urging the federal agency to reconsider the changes. The letter, signed by dozens of state and national groups and chambers of commerce, called the new policies “a misguided approach that ignores critical economic data underscoring the job creating power of the immigrant community.”

The SBA has a limited lending capacity, said Maggie Clemmons, a spokesperson for the agency. “The agency’s rule change will help ensure more American citizens have access to funding previously granted to noncitizens,” she said in an email.

The SBA approved 3,358 loans for small businesses owned partly by a lawful permanent resident in fiscal year 2025, largely during the Biden administration, Clemmons said. That represented 4% of the 85,000 loans approved by the agency. In California, the changes could affect about 220,000 small business owners who hold green cards, said Carolina Martinez, chief executive of CAMEO Network, a national association of organizations that support small businesses.

“The most important thing for us is to really understand that this SBA decision… is really bad for the American economy,” Martinez said.

Pursuing the American Dream

Cristina Foanene, a Romanian immigrant who arrived in the United States 20 years ago, was a green-card holder when she obtained an SBA loan in 2018 that allowed her and her husband to buy a building and expand their glass company, MCS Glass, in Fresno. They now have 30 employees.

“The loan gave us an opportunity to create more jobs, to have an even greater impact in our community,” Foanene said. Their goal is to manufacture more products and create more positions, she added.

She said she doesn’t know where the business would be today without the SBA loans they received over the years. They just signed their third loan last month, Foanene said, their first as American citizens.

She called herself loyal to this country and said she’s sad that others like her may not have the same opportunities to pursue the American Dream by securing SBA loans while “respecting the laws.”

“It literally breaks my heart,” Foanene said. “There are so many good people with good intentions. I feel it’s unfair.”

Other entrepreneurs or independent contractors also lose a possible safety net that SBA loans once provided.

“During the pandemic, these loans were crucial to people’s survival,” said Dung Nguyen, program and organizing director for California Healthy Nail Salon Collaborative, an organization that advocates for Vietnamese immigrants, many of whom work in the nail-salon industry. The group signed the Small Business Majority’s letter to the SBA.

Nguyen said the nail-salon workers and owners who took out those loans during the pandemic are still paying them back.

‘A new kind of status’

Kenia Zamarripa, spokesperson for the San Diego Regional Chamber of Commerce, which also signed the letter to the SBA, said this latest policy change is another example of how immigrants are more vulnerable as federal funds for other programs have been taken away. Her group and others are pushing for immigration reform that includes a standardized path to citizenship, she said.

“This is a community that’s doing things the right way, looking for a legal path,” she said. “It’s like you’re punishing them for doing the right thing.”

The SBA changes push green-card holders to “informality,” Zamarripa said. “What’s next? What other resources will be taken away? How else will immigrants continue to be targeted?”

Others echo that concern.

“This dialog is really challenging our concept of what undocumented means,” said Gabriela Alemán, a spokesperson for Mission Asset Fund, a San Francisco organization that supports and lends to small business owners. “These are community members that are now being pushed into a new kind of status.”

Mission Asset Fund’s lending circles — modeled after the Mexican community-based lending practice called tandas — can provide up to $2,500 in loans to small business owners. The group just got its California lenders’ license and will eventually be able to provide larger loans, Alemán said.

But it will be tough for groups like it to fill the gap left by the SBA’s new policies for permanent legal residents who may want to start or grow their businesses.

“There are not any other options at this scale (that the SBA provides),” said Brian Kennedy Jr., entrepreneur ecosystem director at AmPac Business Capital, a Los Angeles-area community development financial institution and SBA partner. “We’re talking about $35,000 up to $30 million.”

What’s next

Many small business owners already use — and may increasingly rely on — community development financial institutions and other lenders whose mission is to help people with limited options, credit histories and savings. They could also turn to the state for help. State-funded options include a small business loan guarantee program through its IBank, and programs through the treasurer’s office that reduces risks to lenders by pledging state funds as collateral, or contributing to loan-loss reserves.

Microenterprise Collaborative of Inland Southern California works with lenders, technical assistance providers and community partners to help small business owners in Inland Southern California.

Pamela Deans, the group’s executive director, said the SBA’s policy change will alter how the organization refers entrepreneurs to sources of capital. Rather than pointing them to “a relatively straightforward” SBA process, she said the group will have to inform them of a more fragmented set of options and warn them about predatory lending.

“Many of these would‑be owners will have a much harder time piecing together enough safe, affordable capital to lease a space, buy equipment or cover early working capital — so the taquería, the child care business, the trucking startup may never open in the first place,” Deans said.

Bianca Blomquist, California director for Small Business Majority, also is concerned about small business owners turning to unscrupulous lenders. She said her group found out recently that an owner of a child care business in downtown L.A. took out a $10,000 loan at what she thought was 13% interest. It was actually closer to 250%.

Other advocates are hoping philanthropy and impact investors will step up and make more capital available to small lenders.

“Women, entrepreneurs, immigrants and communities of color always have had to think outside the typical paths,” said Leticia Landa, executive director of La Cocina, a small business incubator in San Francisco. “I do hope, especially in California, that we’re going to come up with something.”

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This story was originally published by CalMatters and distributed through a partnership with The Associated Press.