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If you’re a small business owner hoping to sell, retire, or simply grow, the rules of the game are about to change — again. And not quietly.
On June 1, the U.S. Small Business Administration will implement a sweeping reset of how it backs loans under its popular 7(a) and 504 programs. On the surface, the changes are about risk: restoring traditional standards, tightening oversight, and steering clear of what the SBA now calls “irresponsible lending.” But underneath, they raise a bigger question — not just about how small businesses get financed, but who gets to participate in the American economy at all.
One rule now demands that businesses be 100% U.S.-owned to qualify for SBA-backed loans — up from the previous 51%. That means if even 1% of a company is held by a legal foreign resident who’s had their green card for less than six months, the loan is off the table. It’s a small detail with huge impact: four in ten small business owners in the U.S. are foreign-born. And many of them, despite being legally present, would no longer qualify.
Another rule targets equity rollovers, a common strategy where a seller keeps a small stake in the business after selling it — often to stay involved, provide continuity, or maintain licensing. Under the new guidelines, any seller keeping even a sliver of ownership must now personally guarantee the full loan. For many, that’s a nonstarter. The result? Fewer deals, more complexity, and potentially more risk — not less.
Supporters of the changes say they’re just a return to prudence. After years of looser underwriting, the SBA’s loan program reported a $397 million loss last year — its first in over a decade. That’s not nothing. But treating every seller like a potential liability, and every minority stake as a threat, may be overcorrecting. In practice, the new rules take away some of the very levers that have helped smooth transitions, reduce default risk, and keep experienced operators in the room when new owners step in.
There’s also a philosophical shift underfoot. In an official statement, the SBA described the reforms as an effort to “put American citizens first.” It’s a phrase that may resonate politically, but one that sits awkwardly in the world of small business — a world powered not by slogans, but by paperwork, relationships, and problem-solving. Most business brokers and lenders aren’t looking to score ideological points. They just want to close solid, sustainable deals.
That’s getting harder. Several practitioners report deals falling apart just weeks from the finish line — not because of weak fundamentals, but because new rules suddenly made someone ineligible. The message, whether intended or not, is clear: the pool of acceptable buyers has narrowed, and fast.
Some of this may be temporary. The market will adjust, as it always does. Deal structures will evolve, more equity may come from buyers, and new licensing workarounds will emerge. But it’s also a test: what happens when policy prioritizes rigidity over flexibility, exclusion over inclusion?
In a country where nearly half of all private-sector jobs are tied to small businesses, these aren’t academic questions. Baby Boomers own over two million of these firms. As they look to retire, many will rely on buyers who need financing. The SBA’s job isn’t just to protect taxpayer money — it’s to make those transitions possible.
There’s nothing wrong with wanting to reduce risk. But some risks — like cutting off qualified buyers, or discouraging sellers from staying engaged — don’t show up on a balance sheet. They show up later, in missed opportunities and broken deals.
The American small business engine doesn’t run on purity tests. It runs on trust, effort, and the messy, essential work of making things happen — often between people with different passports, accents, or backgrounds.
In a moment when entrepreneurship is one of the few remaining bipartisan ideals, the real question is not whether we should be careful. It’s whether we’re being careful about the right things.
