Guidelines for SBA loans for non Citizens
The Small Business Administration (SBA), created in July, 1953, is as a federal agency whose mission is to improve the economy by assisting the small business community. The SBA achieves its mission by guaranteeing many of the loans that financial institutions make to eligible small businesses. In exchange for this guarantee the SBA charges a fee, which is paid by the borrower. The goal of the SBA is to encourage loans to businesses that might not otherwise qualify for loans through normal/traditional lending sources.
The SBA guarantee is available for all businesses owned by citizens of the USA. The fact that the citizen is a naturalized citizen is not a factor. All that is needed is that the individual state his U.S. citizenship in Form 912 “Statement of Personal History”, which is one of the forms that all business owners need to file when requesting SBA guaranteed financing.
This does not mean that businesses that are majority owned or controlled by persons who are not citizens of the US are immediately ineligible for SBA assistance. The business might be eligible provided the persons are lawfully in the US. In order to confirm eligibility, the SBA and the lenders work with the U.S. Citizenship and Immigration Services (USCIS), which is the government agency that oversees lawful immigration to the United States.
Eligible businesses owned by non-U.S. citizens that are eligible for SBA assistance fall under two categories:
1) Businesses owned by Legal Permanent Residents (LPRs / Green Card Holders) are eligible. A Green Card holder has been granted authorization to live and work in the U.S. on a permanent basis. As proof of status, a permanent resident card, commonly called a “Green Card.” Is granted. Most Green Card Holders are sponsored by a family member or employer in the U.S. Others become permanent residents through refugee or asylee status or other humanitarian programs.
2) Business owned by Legal non-permanent residents. Not being owned by a citizen or green card holder does not immediately disqualify a business from SBA assistance. However, additional requirements are needed from these businesses and their owners. These requirements are as follows:
(a) The application must contain assurance that management is expected to continue in place indefinitely and have U.S. citizenship or verified LPR status.
i. Management must have operated the business for at least 1 year prior to the application date. (This requirement prevents financial assistance to “start-up” businesses owned by aliens who do not have LPR status.)
ii. The personal guaranty of management must be considered as a loan condition and if not required, the decision must be explained in the loan file.
(b) The applicant must pledge collateral within the jurisdiction of the U.S. sufficient to pay the loan in full at any time during its life. If the small business applicant owned by foreign nationals, foreign entities or non-immigrant aliens residing in the US does not have sufficient collateral, the applicant is not eligible for a guaranteed loan.
(c) In order for a business not to be subject to these additional requirements, it must be at least 51 percent owned by individuals who are U.S. citizens and/or who have LPR Status from USCIS and control the management and daily operations of the business.
Disclaimer: Some of the information above was extracted from the SBA’s Lender and Development Company Loan Programs “SOP 50-10(5)” in effect during August 2012. Although the SBA has not changed its Standard Operating Procedures for a couple of years, it is always a good idea to take a look at them for changes.
For additional information about SBA financing, and funding your business you can read more by buying the following books at Amazon: The SBA Loan Book: The Complete Guide to Getting Financial Help Through the Small Business Administration
or Get Your Business Funded: Creative Methods for Getting the Money You Need