Washington, Feb 5 : Top Democrats have criticised a new Small Business Administration policy that blocks businesses owned by legal permanent residents from getting SBA loans.

They said the move hurts immigrant entrepreneurs and local economies.

Sen. Edward J. Markey of Massachusetts and Rep. Nydia Velazquez of New York on Wednesday (local time) said the policy reverses decades of practice and shuts out lawful immigrants who run small businesses.

â??The Trump administration is stoking the flames of hatred, spreading fear and confusion among immigrants and small business owners,â?? Markey and Velazquez said.

â??Rather than support hard-working 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 Administrationâ??s message to immigrants is clear: you are not welcome to pursue the American Dream.â??

The SBA published the policy on February 2. It takes effect on March 1.

Under the rule, 100 per cent of a small business must be owned by US citizens or US nationals who live in the United States, its territories, or possessions. Legal permanent residents, also known as green card holders, will not be allowed to own any share of a business seeking SBA-backed loans.

The policy also cancels an earlier SBA notice from December. That notice briefly allowed up to 5 per cent foreign ownership, including by legal permanent residents whose main residence was outside the United States. The SBA said the earlier notice is rescinded.

That December guidance had already drawn criticism. It listed several groups as â??ineligible persons.â?? The list included refugees, asylum recipients, visa holders, and people covered by Deferred Action for Childhood Arrivals. It also singled out individuals who were citizens of or lived in China or Hong Kong.

Democratic lawmakers said the policy changes have caused confusion for lenders and borrowers.

They said access to SBA loans has dropped sharply.

In July, Markey and Velazquez wrote to the SBA warning that new citizenship checks were too strict and would cut off eligible small businesses. In September, Markey said SBA lenders told him the rules were hard to apply and slowed lending.

In December, Markey and other Democratic members of the Senate Small Business Committee sent another letter to SBA Administrator Kelly Loeffler. They repeated their concerns and pointed to a steep fall in lending.

That letter said SBA loan volume fell by 46 per cent from June to August 2025. Lawmakers linked the drop to new citizenship rules introduced earlier that year.

According to the lawmakers, changes that took effect June 1, 2025, blocked loans for businesses with even small ownership stakes held by noncitizens.

This included refugees, asylees, visa holders, and conditional green card holders. That was true even if US citizens owned most of the business.

They said the changes reversed more than 25 years of SBA policy. Markey and Velázquez said SBA loans help small businesses start up, expand, and hire workers. They said immigrant-owned businesses rely heavily on such financing.

The SBA said the new rules follow federal law and an executive order titled â??Protecting the American People Against Invasion.â?? Lenders must now certify that no owner of an applicant business is an ineligible person.

The SBA has not responded publicly to the lawmakersâ?? latest criticism.

For decades, those programs allowed businesses owned by US citizens and lawful permanent residents to qualify.

Immigrants play a major role in the creation of the US small businesses. Many start firms that employ American workers and serve local communities across the country.

/IANS