A recent policy change by the U.S. Small Business Administration (SBA) has cut off access to its loan programs for non-U.S. citizens, a decision that includes lawful permanent residents holding green cards. The new regulation, which took effect in March for direct SBA loans and expanded in April to include SBA-backed loans from private institutions, has sparked alarm among business advocates who warn of severe economic consequences, particularly in California.
For decades, the SBA has been a vital source of capital for immigrants seeking to establish and grow their businesses. Its programs often feature low-interest rates and are accessible to entrepreneurs without extensive credit histories, providing a pathway to economic mobility. The government guarantee on SBA-backed loans also encourages private banks to lend to individuals they might otherwise consider too risky. With this new rule, any business even partially owned by a green-card holder is now ineligible for this critical funding, affecting a wide range of industries from restaurants and nail salons to medical clinics and law practices.
Los Angeles, a city built on the aspirations of immigrants from its very founding, stands to feel the effects of this policy acutely. The region’s economic vibrancy has always been tied to the diverse communities that call it home. This policy shift presents a significant hurdle for the modern-day pioneers who, much like the city's original multicultural settlers, seek to build a future through enterprise and hard work.
State economy faces significant impact
California’s economy, the largest in the nation, is uniquely dependent on the success of its immigrant entrepreneurs and small businesses. According to the California Office of the Small Business Advocate, small businesses are responsible for an astonishing 99% of all net new jobs in the state. The governor’s office of business and economic development (GO-Biz) reports that immigrant entrepreneurs constitute 40% of California’s business community, generating $28.4 billion in income in 2023 alone.
The SBA’s decision could directly impact these figures. Carolina Martinez, chief executive of the CAMEO Network, a national association supporting small businesses, estimates that approximately 220,000 small business owners with green cards in California could be affected. “The most important thing for us is to really understand that this SBA decision… is really bad for the American economy,” Martinez said.
In explaining the change, an SBA spokesperson, Maggie Clemmons, stated that the agency has a limited lending capacity. “The agency’s rule change will help ensure more American citizens have access to funding previously granted to noncitizens,” she said in an email. According to Clemmons, in the 2025 fiscal year, the SBA approved 3,358 loans for businesses partially owned by a lawful permanent resident, accounting for 4% of the 85,000 loans approved that year.
Advocates call for policy reversal
The new rule has drawn a sharp rebuke from a coalition of business advocacy organisations. In mid-March, Small Business Majority, a national advocacy group, sent a letter to the SBA urging it to reconsider. The letter, co-signed by dozens of state and national chambers of commerce and other groups, described the new policy as "a misguided approach that ignores critical economic data underscoring the job creating power of the immigrant community."
Cristina Foanene, a Romanian immigrant who arrived in the U.S. 20 years ago, exemplifies the success story that advocates fear will become rarer. As a green-card holder in 2018, she and her husband secured an SBA loan to purchase a building for their Fresno-based company, MCS Glass. The loan enabled them to expand significantly, and they now employ 30 people. “The loan gave us an opportunity to create more jobs, to have an even greater impact in our community,” Foanene said. They have since become American citizens and took out their third SBA loan last month.
It literally breaks my heart. There are so many good people with good intentions. I feel it’s unfair.
Kenia Zamarripa, a spokesperson for the San Diego Regional Chamber of Commerce, which also signed the letter, said the policy unjustly penalizes immigrants who are following the legal path to residency and citizenship. “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.”
Fears of a growing shadow economy
Community leaders worry that cutting off legal avenues for financing will have unintended consequences. Gabriela Alemán, a spokesperson for the San Francisco-based Mission Asset Fund, which provides small loans to business owners, noted the troubling implications. “This dialog is really challenging our concept of what undocumented means,” Alemán said. “These are community members that are now being pushed into a new kind of status.”
The concern is that entrepreneurs, unable to secure traditional funding, may be pushed toward "informality," as Zamarripa described it, or fall prey to predatory lenders. Bianca Blomquist, the California director for Small Business Majority, shared a cautionary tale of a child care business owner in downtown L.A. who unknowingly took out a $10,000 loan with an interest rate approaching 250%, despite believing it was 13%.
The reliance on SBA loans was particularly highlighted during the COVID-19 pandemic. Dung Nguyen, of the California Healthy Nail Salon Collaborative, said these loans were a lifeline for many Vietnamese immigrant-owned businesses. “During the pandemic, these loans were crucial to people’s survival,” Nguyen said, adding that many are still repaying them. This safety net is now gone for future crises.
Searching for alternative funding
While the SBA was a primary source of accessible capital, a fragmented landscape of alternatives exists. Immigrant entrepreneurs will now have to rely more heavily on community development financial institutions (CDFIs) and other mission-driven lenders. However, these organisations may not have the capacity to fill the void left by the SBA. “There are not any other options at this scale,” said Brian Kennedy Jr. of AmPac Business Capital, a Los Angeles-area CDFI. “We’re talking about $35,000 up to $30 million.”
California does offer some state-funded options, including a loan guarantee program through its IBank and other programs from the state treasurer's office designed to reduce risk for lenders. Organizations like the Microenterprise Collaborative of Inland Southern California are now recalibrating their approach to advising entrepreneurs, guiding them through a more complex and potentially perilous funding environment. The recent trend of restaurant openings hitting a record high could be dampened if new restaurateurs cannot find startup capital.
Advocates remain hopeful that the state’s innovative spirit will lead to new solutions, with some looking toward philanthropy and impact investors to step in. “Women, entrepreneurs, immigrants and communities of color always have had to think outside the typical paths,” said Leticia Landa, executive director of San Francisco incubator La Cocina. “I do hope, especially in California, that we’re going to come up with something.” For now, however, the path for many aspiring business owners has become significantly more difficult.
Pamela Deans, executive director of the Microenterprise Collaborative of Inland Southern California, warned that the hurdles are now much higher. “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.
