Criticism of the Small Business Administration’s (SBA) recent adjustments to its immigration-related rules is escalating among Democratic lawmakers. The agency has modified its citizenship and residency requirements, allowing businesses with up to 5% foreign ownership to access SBA-backed capital. This change comes amid a significant downturn in lending activity, particularly in the SBA’s flagship 7(a) loan program, which has seen a year-over-year decline of 30% since September.
The revised regulations, announced on June 1, 2025, previously mandated that businesses be entirely owned by U.S. citizens, nationals, or green card holders. The latest rule only slightly relaxes these standards, allowing for minimal foreign ownership. SBA spokesperson Maggie Clemmons stated that the adjustments aim to “empower more small businesses, especially those in manufacturing and related critical industries, to secure needed capital to hire, expand, and invest.”
Despite these modifications, many lawmakers remain unconvinced. Senator Edward Markey (D-Mass.) voiced strong concerns, asserting, “The Trump SBA is doubling down on their draconian ownership requirements, which will hurt small businesses and surrounding communities.” He criticized the SBA for perpetuating fear among small businesses led by legal immigrants. Markey, along with 18 other Democratic senators, believes that the restrictive ownership rules have contributed to a decline in lending activity, which dropped by 46% between June and August of 2025.
The SBA’s adjustments come after the implementation of more stringent citizenship and residency requirements, which the Democratic lawmakers argue reverse decades of policy that permitted majority-owned businesses to qualify for loans. In a letter sent to SBA Administrator Kelly Loeffler, they expressed their discontent with the recent changes, emphasizing the need for a more inclusive approach to financing small enterprises.
Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders, acknowledged the challenges the SBA faces in balancing ownership requirements with the need to prevent government-backed capital from benefiting businesses owned by illegal immigrants or individuals from adversarial nations. In an email, he noted that while the new 5% foreign ownership limit may seem inadequate to some, it represents a slight expansion of eligibility in a challenging regulatory environment.
The SBA’s recent policy changes come in the context of a broader lending landscape that has faced significant disruptions, including a 43-day government shutdown that began on October 1, 2025. This shutdown has compounded the decline in lending activity, which is also influenced by a mid-year fee hike and tighter underwriting standards.
As the conversation around the SBA’s immigration policies continues, the agency faces mounting pressure from both lawmakers and industry leaders to foster a more accessible environment for small businesses. With lending numbers showing a sharp decline, the urgency for effective solutions is becoming increasingly evident.
