SBA has published Procedural Notice 5000-876626, Applicant Ownership Citizenship and Residency Requirements for 7(a) and 504 Loans (dated February 11 and effective March 1, 2026).  The Notice revises SOP 50 10 to incorporate the policy changes outlined in , Update to SOP 50 10 8 – Citizenship and Residency Requirements and Recission of Procedural Notice 5000-872050.

For loans processed on a delegated basis, the changes will apply to loans receiving an SBA loan number on or after March 1, 2026.  For loans processed on a nondelegated basis, the changes will apply to all loans that enter R1 status (as indicated in E-Tran) on or after March 1, 2026. [An R1 status indicates that the loan application has successfully passed SBA’s initial compliance check and validations and is currently undergoing review by SBA.]

Under the revised program requirements, to be eligible for SBA financing, 100% of the direct and indirect owners, and, except as noted below, all SBA-required guarantors: 

  • Must be U.S. Citizens (birthright or naturalized) or U.S. Nationals, and;
  • Must have their Principal Residence in the United States, its territories, or possessions (as defined in revised Appendix 3).

In addition, all direct and indirect entity owners must be created, organized, or incorporated in the U.S., its territories, or possessions.

The guarantor exception allows a limited or supplemental guarantor to be an ineligible person (except an undocumented alien) when the guaranty is a supplemental guaranty required by the Lender, or when the guaranty is a spousal guaranty necessary to support the pledge of jointly held required collateral as required by SBA. 

For purposes of determining eligibility, the 6-month lookback period applies.  That is, a loan is ineligible if, during the 6 months prior to the date on which the SBA loan number is issued, any direct or indirect owner or required guarantor (except as noted) is an ineligible person.  The lookback period does not apply if the ineligible person completely divests their ownership interest prior to the date of issuance of the SBA loan number.

Per the Notice, “SBA Lenders must certify in E-Tran that, to the best of their knowledge, no direct or indirect owner or SBA-required guarantor is an ‘Ineligible Person’ as defined in Appendix 3 of this SOP”.

The requirement for citizenship or U.S. National status applies only to owners and guarantors, not associates of the business (as defined in 13 CFR 120.10).  However, the notice states that undocumented aliens who are in the U.S. Illegally are prohibited from being officers, directors or employees of an applicant business. 

The Notice also provides a revised definition for Ineligible Person [SOP 50 10 8, Appendix 3, Definitions (p. 406)]:   

Ineligible Person:

An Ineligible Person includes, but is not limited to:

1. Undocumented aliens who are in the U.S. illegally;

2. An individual granted asylum, a refugee, a visa holder, a non-immigrant alien under 8 U.S.C. § 1101(a)(15), or those under Deferred Action for Childhood Arrivals (DACA);

3. An individual, including a visa holder, who is not a U.S. Citizen, or U.S. National (non-resident aliens);

4. An individual (including U.S. Citizens and U.S. Nationals) who has their Principal Residence outside of the United States, its territories, or possessions;

5. A business concern or entity that was created, organized, or incorporated outside of the United States, its territories, or possessions;

6. An individual who is a citizen of the People’s Republic of China, or the Special Administrative Region of Hong Kong;

7. A Lawful Permanent Resident (LPRs) (commonly referred to as “green card holders”), including individuals with permanent Unconditional) LPR status, and Conditional LPR status;

8. An individual, business concern, or entity on the Office of Foreign Assets Control (OFAC) sanctions list. See Paragraph J of this Chapter.

A list of all required applicant certifications is included in the notice. The notice states that SBA is updating SBA Form 1919, SBA 7(a) Borrower Information Form, and SBA Form 1244, SBA 504 Borrower Information Form, to reflect the new requirements, and requires lenders to collect and retain all required information and certifications until the updated forms are issued. 

Finally, the notice indicates that for certain servicing requests (for example, a change of ownership, assumption or other substitution of an owner or SBA-required guarantor), the new individual may not be an ineligible person.

Please carefully read the notice for complete details on the new requirements. And if you missed SBA’s February 11 Connect event which briefly discussed the new policy, you can view the recording of that session by going to SBA’s On-Demand training page, www.sba.gov/partners/lenders/training-demand.  Finally, watch for communication from NAGGL regarding upcoming training on the revised citizenship and residency requirements.