Sayuri Tsuchitani once relied on a small-business loan to start her own storefront: a Japanese head spa. Today, such an opportunity would be out of reach for her due to significant changes in the Small Business Administration’s (SBA) lending policy. Before venturing into business, Tsuchitani spent two decades working as a hairdresser, which took a toll physically. When the pandemic closed the salon where she worked in Los Angeles, she seized the opportunity to apply for an SBA loan to start her own business.
Tsuchitani credits the SBA for helping her achieve what she calls the American Dream. She leveraged pandemic-era funding to establish a Japanese head spa offering services like blood-flow massages and Ayurvedic treatments. Her business grew from one location to three, employing ten people in total. However, under the SBA’s new policy, Tsuchitani would be ineligible for a loan as the agency now restricts lending to businesses fully owned by U.S. citizens.
This policy shift stems from a broader initiative during the Trump administration to tighten immigration regulations. Many government programs have imposed restrictions on noncitizens, and the SBA’s move aligns with this trend. The SBA, for the first time, has stopped approving loans for businesses not entirely owned by U.S. citizens. Previously, the agency’s rules limited lending to qualified immigrants living legally and permanently in the U.S. These changes came as a shock to many, including small-business fund management firm head Eda Henries, who said no one anticipated such a restrictive policy.
In statements, the SBA described permanent residents as ‘foreign nationals’ and argued that they should not benefit from American taxpayer dollars, despite the fact that permanent residents also pay U.S. taxes. Kelly Loeffler, head of the SBA, has defended the policy, stating it ensures taxpayer dollars go to U.S. job creators. Though the agency cited an example where one loan had nearly gone to a business 49% owned by an unauthorized immigrant, the broader effect could be significant for immigrant entrepreneurship.
Research indicates that immigrants are more likely to start businesses than those born in the U.S. Despite making up 15% of the population, immigrants own a notable percentage of businesses, according to U.S. Census data. Additionally, a study by the National Foundation for American Policy highlights that two-thirds of U.S. startups valued over $1 billion were launched by immigrants or their children.
Loans for small businesses have historically served as a catalyst for growth, and about 4% of SBA loans last year supported businesses run by permanent residents. Although this represents a small portion, for those involved, the loans have been transformative. Cristina Foanene, who runs a glass company in Fresno, California, credits SBA loans for the expansion of her business, which now employs 30 people. The initial SBA loan was crucial in building trust with other investors.
The policy change raises concerns about where immigrant entrepreneurs will find substantial funding. Traditional banks are often hesitant with small firms, leaving some owners potentially turning to predatory lending. Henries fears this change may deter new businesses from starting or expanding. Efforts to reverse the policy have emerged, with Democrats in Congress proposing legislation to reinstate loan eligibility for permanent residents.
The policy’s impact is already unfolding as lenders now spend more time verifying citizenship status, leaving some business deals stalled. Several permanent resident business owners have refrained from speaking on the record for fear of negative attention. Foanene, now a U.S. citizen, reflects on her own journey with pride, suggesting that stories like hers might change SBA leaders’ perspectives on the benefits immigrant entrepreneurs bring to the country.