New Small Business Administration loan policy could affect Bay Area entrepreneurs

By John Ramos

A Bay Area town is concerned about its business community as the federal government has banned foreign nationals and non-citizens from certain loan assistance programs, even if they are in the country legally.

A week ago, the federal Small Business Administration announced a change in policy.

“Small business owners applying for any SBA loan program must be U.S. citizens or U.S. nationals with their principal residence in the United States,” the SBA states.

And in San Pablo, it could affect a large portion of the business community as most are owned by immigrants, according to Lesaly Choy, the executive director of San Pablo’s Economic Development Corporation.

“They are here legally. They pay taxes. They employ not just themselves but others, and serve as the economic backbone of their communities,” Choy said.

She said the business owners often rely on loans guaranteed by the Small Business Administration so they can get better rates to help their businesses grow or survive economic downturns. So, the SBA’s proclamation banning legal permanent residents, people holding green cards, from getting any SBA-backed loans will likely hit them hard.

In the announcement, SBA Administrator Kelly Loeffler said, “Our responsibility is clear: the limited resource of SBA financing must prioritize American citizens who are building businesses and creating jobs here at home.”

“This does come from ‘on high,’ said Choy. “This is the edict of the top person who has oversight of these programs. So, it is a position of the current administration. More than that, we cannot say. These come down and they change the rules and it means that it does sort of change the playing field.”

And it’s a large part of the playing field, according to Allison Allain, who owns a small construction company and founded the National Small Business Advocacy Council.

“Forty percent of our small businesses (in California) are owned and operated and founded by immigrants,” she said. “If we talk nation-wide, that averages out to nearly a quarter of all businesses in the entire US. That is a significant statistic. I do not know what their immigration status is, but I imagine many are green card holders, right?”

Legal residency was already required for any SBA-backed loan. The SBA says it needs to spend its resources on American citizens, but they don’t actually lend out any money. The loans in question come from private lenders, with a guarantee from the federal government on repayment. 

And Allain said the repayment rate for immigrants is so good that the government actually makes money on the loans. Mark Herbert, COO of CAMEO Network, a small business support organization, said about 5 percent of SBA loans were going to permanent residents to the tune of about $2 billion.

And he said it makes no sense to start cutting off capital to businesses at a time of rising energy and transportation costs and tariff-caused supply chain disruptions.  

“And what makes even less sense,” said Herbert. “Is that we know that immigrant entrepreneurs, people that have come here legally, legal permanent residents, start businesses at twice the rate of US born counterparts. And we also know that small businesses create 2/3 of all the new jobs in this country. So, we’re specifically talking about limiting capital access to the very job creators that are helping our small businesses grow, helping our Main Streets grow, and helping our communities grow.”

In back of San Pablo City Hall is a colorful mosaic honoring the various immigrant groups that make up the city.  It used to be a source of pride for Leslay, but she says it is now a growing symbol of sadness.

“They’re not able to play where they paid, you know?” she said. “It’s just one of the things that, um, is interesting. It’s difficult, you know?  We can’t explain it to anybody nor would we try.”