Starting March 1, 2026, the SBA will require all loan applicants to be U.S. citizens or nationals. Until now, foreign nationals who owned up to 5% of a business could qualify for the agency’s 7(a) and 504 loans.
The programs have long been attractive to tech founders because of lower down payments, longer repayment terms, and favorable interest rates.
An estimated 5% to 15% of SBA loans historically went to immigrant-owned businesses. The question now is what happens when they lose access under the new rules.
Restructuring ownership
“Without access to SBA loans, foreign entrepreneurs in life sciences or other tech sectors will face significantly higher financing costs,” said Lindsey Mignano, a venture financing attorney at SSM who works with early-stage startups.
Mignano said the change could push immigrant founders to restructure ownership or seek alternative financing.
“Foreign founders may have to transfer equity to U.S. partners, turn to venture capital or conventional bank loans, or explore non-SBA government programs,” she said. “Such restructuring can create legal, tax, and governance complexities, and raises fairness concerns if equity must be divested solely to meet loan eligibility.”
Economic impact
Without SBA programs, immigrant owners will face higher costs, slower growth, or may never start their businesses, said Dean Kaplan, CEO of The Kaplan Group.
“The majority of SBA loans fund working capital, so this will affect survival and growth, and ultimately reduce job creation, which impacts U.S. citizens as well,” Kaplan said. “Some SBA financing is used to purchase equipment and fixed assets at lower costs.”
International tech companies entering the U.S. will need to carefully document board control, IP ownership, and U.S. operational substance.
“Smaller companies may simply not be able to open in the U.S.,” Kaplan said. “Many technological breakthroughs are initiated by small teams. Those ventures may now grow abroad, and the jobs they create will also be outside the U.S.”
Early-stage R&D capital
It’s still unclear how the SBA’s changes will affect SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) programs, key funding sources for biotech and clean energy startups.
The grants provide non-dilutive funding, so founders do not give up equity, making them crucial in high-risk sectors that struggle to secure early-stage R&D capital.
According to Kaplan, SBIR and STTR are impacted by the new immigrant restrictions, although ownership rules are less stringent.
“There can be no ownership from citizens of restricted countries like China, Iran, North Korea, and Russia, and all work financed by these programs must be performed in the U.S.,” he said.
Mignano added that even without an immediate rule change, the new 100% citizenship standard signals that ownership matters more and could influence SBIR and STTR decisions.
“This could lead to increased scrutiny of foreign-founded startups and affect non-dilutive funding in sectors like hardware, climate tech, med tech, and advanced manufacturing,” she said.
