SBA SOP Changes Are Reshaping Ownership Eligibility: What Lenders Need to Know

Lenders have always been responsible for verifying owners’ citizenship and residency according to SBA SOP 50 10 8.

But beginning January 1st of 2026, and then again as of March 1st, standards have changed and are being enforced with greater precision.

In short, ownership eligibility now more than ever is a key consideration for SBA compliance.

What was

Before January 1st of 2026, SBA SOP 50 10 8 permitted business ownership by:

• U.S. citizens

• U.S. nationals

• Lawful permanent residents (LPRs)

• And certain eligible non-citizens, subject to documentation and status

Interpretation and documentation practices were often a tad subjective, which – as you might imagine – tended to cause eligibility issues. Sometimes – though not always – these issues could be corrected prior to approval.

Starting January 1st 2026

SBA issued Procedural Notice 5000 872050, effective January 1st 2026, which included what’s been referred to as the “5% Exception.”

Borrowers could have up to 5% aggregate ownership held by:

• Foreign nationals

• U.S. citizens or nationals whose principal residence was outside the U.S., including U.S. territories and possessions

• Conditional LPRs

While this initially added flexibility to ownership requirements SBA SOP 50 10 8, in practice it created increased workload. Ownership aggregation – including residency verification – and indirect ownership tracing was now essential – and time-consuming.

As of March 1st 2026

Effective March 1st, Policy Notice 5000 876441 rescinds the 5000 872050 Notice.

And it doesn’t just revert back to what came before; it imposes even more rigorous rules for ownership eligibility.

• 100% of direct and indirect owners must be U.S. citizens or U.S. nationals

• All owners must have their principal residence within the U.S. or its territories or possessions

• LPRs may not own even the smallest percentage of the business

• Foreign ownership of any type is prohibited

In short, any non-citizen ownership, foreign interest, or out-of-country principal residence creates unrecoverable, no-exceptions eligibility denial, which may lead to a repurchase demand. Ownership violations cannot be cured post-disbursement.

There are no exceptions, and Lenders assume full responsibility – and therefore full risk exposure – for validating ownership eligibility.

What Lenders should do

Ownership verification has never been merely procedural; it is a fundamental eligibility determination and a critical risk control for preventing denials, guaranty repairs, and repurchase exposure. To mitigate risk and maintain SBA compliance, lenders should:

• Review and update ownership verification procedures and standards

• Update documentation templates to clearly capture citizenship and principal residence

• Reinforce these ownership eligibility standards through targeted SBA lender training

• Recognize that these changes add steps and time – plan accordingly with both lending teams and borrowers

These SBA SOP changes are coming quickly and, at times, appear to be reverse prior guidance. We recognize how challenging this is for lending teams and how difficult it can be to keep up, but we cannot emphasize enough how important it is to stay current.

As always - and now more than ever - we’re here to help through our lender consulting services, including SBA compliance reviews, procedure assessments, documentation updates and SBA lender training. Give us a call at 877-576-0819, or contact us through this link.

We’re ready to help!