Under a new Small Business Administration (SBA) policy taking effect March 1, businesses owned by legal permanent residents will no longer be eligible for SBA-backed loans. The new policy requires all direct and indirect owners of loan applicants to be U.S. citizens or U.S. nationals residing in the U.S. mainland or U.S. territories.

This information was conveyed through a notification sent to banks by the National Association of Government Guaranteed Lenders (NAGGL), the largest SBA lender association in the nation. The notification indicated that an official announcement from the SBA would be forthcoming.

This action follows last year's tightening of loan requirements, which changed from businesses where at least 51% of ownership was held by citizens, nationals, or lawful permanent residents, to businesses where 100% was held by citizens or nationals.

According to Hwasaeng Kim, President of Metro City Bank, a directive was issued on January 1 of this year excluding permanent residents of Chinese nationality from SBA loan eligibility, and this guideline appears to have been expanded to all permanent residents.

Consequently, businesses with ownership stakes held by legal permanent residents (LPRs), commonly known as green card holders, will no longer qualify for financial assistance through SBA loans.

This regulation applies to borrowers, operating companies, and eligible passive companies, and encompasses both direct and indirect ownership. All loans involving permanent resident ownership must receive an SBA loan number (PLP number) before March 1 to remain eligible.

The two primary SBA loan programs are 7(a) loans for general business purposes such as working capital and equipment, and 504 loans for the purchase of commercial real estate and heavy machinery.

The industry has expressed surprise at this unexpected change. It is anticipated that Korean banks that have relied heavily on SBA loans as a major source of income, and the small business market within the immigrant community, will be somewhat affected.

Within the financial industry, there are dissenting voices questioning whether it is consistent with the purpose of SBA loans to eliminate government support for legal permanent residents who are taxpayers.

President Kim advised, "Permanent resident business owners should quickly pursue obtaining citizenship. Without access to SBA loans, they will need to obtain conventional loans offered by existing banks, but the requirements for these loans are becoming stricter."

President Kim predicted that this measure would not have a significant impact as most business owners who obtain SBA loans are U.S. citizens.

According to the Associated Press, Small Business Majority, an advocacy group for small businesses, stated that this action is a "decision that will limit the growth of small businesses and job creation across the country."

John Arensmeyer, CEO of the organization, criticized the decision, saying, "This decision by the Small Business Administration (SBA) overlooks the reality that immigrants are twice as likely to start businesses as U.S. citizens. Considering this reality, the SBA's strict regulations will negatively impact small business creation across the U.S. for years to come."

By Sung Ku Hong, Chief Editor of NNP, U.S. / Special Correspondent for this publication NNP info@newsandpost.com