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U.S. small business loans to exclude noncitizens, Korean community fears broader implications

Published: 05 Feb. 2026, 14:41 Updated: 05 Feb. 2026, 18:41

U.S. President Donald Trump delivers remarks at his ″Make America Great Again″ rally in Pickens, South Carolina, July 1, 2023. [REUTERS/YONHAP]

For decades, loans backed by the U.S. Small Business Administration (SBA) have helped immigrants turn corner shops into livelihoods. Starting in March, that pathway will narrow abruptly, as the Trump administration limits the program to U.S. citizens — a shift critics warn could foreshadow broader financial exclusion of noncitizens.

Concern is mounting from the Korean American community amid speculation that the Trump administration, with the November midterms approaching, could gradually expand the restrictions to exclude noncitizens from all financial services such as home mortgages.

Only to 100 percent American-owned businesses

“SBA is requiring that 100 percent of all direct and/or indirect owners of a small business applicant be U.S. Citizens or U.S. Nationals who have their Principal Residence in the United States, its territories, or possessions,” the new guidelines announced on Monday. The change effectively excludes lawful permanent residents, who do not have voting rights, from the program.

The 7(a) program of the SBA helps people starting self-employment or small businesses — especially those with limited U.S. credit history or little economic track record — secure bank financing by providing a government guarantee covering 75 to 85 percent of the loan. If permanent residents are excluded, many could effectively be shut out of bank loans.

Steve Kang, director of the Korean American Federation of Los Angeles, speaks during an interview with the JoongAng Ilbo at the federation office in Los Angeles in June 2025. [KANG TAE-HWA]

"The Trump SBA is committed to driving economic growth and job creation for American citizens — which is why, effective March 1, the agency will no longer guarantee loans for small businesses owned by foreign nationals," Maggie Clemmons, an SBA spokesperson said in a statement to CBS News. "Across every program, the SBA is ensuring that every taxpayer dollar entrusted to this agency goes to support U.S. job creators and innovators."

"The Trump administration is stoking the flames of hatred, spreading fear and confusion among immigrants and small business owners," Sen. Edward J. Markey of Massachusetts and Rep. Nydia Velázquez of New York said in a joint statement on Monday. "Rather than support hardworking legal immigrants to start or expand a business, the Trump SBA is choosing hatred by barring green card holders from receiving an SBA loan.

“The administration's message to immigrants is clear: You are not welcome to pursue the American Dream."

A revised guidance update states that on Feb. 2 the U.S. Small Business Administration (SBA) changes eligibility for the 7(a) loan program to require 100 percent ownership by a U.S. citizen or national and a primary residence within the United States. [KANG TAE-HWA]

A lifeline cut for Koreatown

Steve Kang, a board member of the Korean American Federation of Los Angeles, told the JoongAng Ilbo in a phone call interview on Wednesday that SBA loans have been a “lifeline” for Korean American commercial districts.

“My parents also started their business with an SBA loan, and most Korean Americans were able to settle in the United States through this program,” he said.

While there are no exact statistics, Kang estimated that 40 to 50 percent of Korean American small business owners in the Los Angeles area may be permanent residents. If they can no longer access SBA-backed loans, existing businesses could struggle to expand, and many aspiring entrepreneurs could find it difficult to enter the market at all, he said.

The U.S. Small Business Administration (SBA) fiscal year 2025 report. Korean American banks rank among the top lenders by SBA loan standards. The Trump administration plans to allow SBA loans only for U.S. citizens starting in March. [KANG TAE-HWA]

“If Korean Americans can’t get loans from banks, they’ll be pushed into high-interest private lending,” Kang said, adding that the community is in close contact with congressional offices to understand what he described as a unilateral notification issued through executive action.

A local bank official also told the JoongAng Ilbo that for new business owners without an operating track record, bank lending is “virtually impossible” without an SBA guarantee, or would require a much higher down payment.

“The bank has been advising clients since the SBA announcement that it may be better to complete the loan by February,” said the official.

U.S. President Donald Trump, left, speaks next to Ford CEO Jim Farley as he tours Ford Motor Company's River Rouge complex in Dearborn, Michigan, on Jan. 13. [AFP/YONHAP]

Korean American banks could be hit as well

The SBA’s restriction could deal a direct blow not only to Korean American small businesses but also to Korean American banks that have long relied on SBA lending as a key line of business.

An analysis by the JoongAng Ilbo of SBA loan statistics for fiscal 2025, October 2024, to September 2025, found that many Korean American banks ranked high among the 1,421 banks nationwide that handled SBA loans.

Bank of Hope, headquartered in California, ranked 22nd among U.S. banks with $306.13 million in SBA lending, followed by US Metro Bank (25th), Open Bank (33rd), Hanmi Bank (40th), PCB (46th) and CBB (55th).

“Smaller lenders, in particular, could lose most of their customer base because of the policy shift,” a banking industry source said. “It could choke off cash flows centered on self-employed business owners who underpin the Korean American community, potentially triggering wider knock-on damage.”

A Korean restaurant in Koreatown near the Korean American Federation of Los Angeles office in Los Angeles, photographed in June 2025. [KANG TAE-HWA]

Just the beginning

Beyond the immediate impact, some Korean Americans fear the Trump administration could extend financial exclusions beyond SBA loans to other services.

Ryan Kim, a vice president at Centerstone SBA Lending — one of 14 institutions licensed to handle SBA lending in the United States — told the JoongAng Ilbo that talk has been spreading in banking circles that “this is only the beginning.”

“It is possible that noncitizens could eventually be excluded from all financial services, including conventional real estate mortgages,” Kim said.

Detainees are made to stand against a bus before being handcuffed, during a raid by federal agents where about 300 South Koreans were among 475 people arrested at the site of a $4.3 billion project by Hyundai Motor and LG Energy Solution to build batteries for electric cars in Ellabell, Georgia, U.S., Sept. 4, 2025. [REUTERS/YONHAP]

“Even before the recent announcement, eligibility verification for permanent residents — a process that typically took one to two days — had been taking much longer or facing near-indefinite delays,” Kim said. “Some attributed it to a government shutdown, but now it confirmed that it was meant from the start to exclude green card holders. The move could spill over into other areas of finance.”

Trump has also pledged to allow a full tax deduction for auto loan interest only for purchases of U.S.-made vehicles, and the U.S. Treasury Department is expected to release a list of eligible U.S.-made models soon.

“If discrimination is applied to real estate lending for noncitizens, it could cool an overheated market to some extent,” said a Korean American who runs a real estate-related business in Virginia. “But if Trump prioritizes only voting citizens for electoral reasons — separate from Korean Americans’ livelihoods or broader economic fallout — it is entirely possible that noncitizens could be excluded across the financial system.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KANG TAE-HWA [[email protected]]