SBA regulatory changes under Executive Action

investor profile

March 10, 2025

by an investor from University of Oxford in Austin, TX, USA

Big changes to the SBA 7a loan requirements announced last week - https://www.sba.gov/sites/default/files/###-###-#### /Policy%20Notice%20-%20Citizenship%20Requirements%20EO14159%20%28FINAL%###-###-#### %29.pdf. This is their implementation of an executive order (https://www.whitehouse.gov/presidential-actions/2025/01/protecting-the-american-people-against-invasion/).

Going forward the SBA will require lenders to certify that 100% of beneficial owners are citizens of the US, US Nationals or Lawful Permanent Residents. We anticipate the big lenders will push back against this regulatory burden. If this is interpreted and enforced to the letter it's going to change the cap table on deals.

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Reply by an investor
from University of Oxford in Austin, TX, USA
I think this is really going to depend on how far each bank's interpretation goes. If you interpret this change to the fullest, then you have to unravel every entity up to it's beneficial owner...which would include looking at LPs of funds.

I've already seen the situation you describe cause a failed deal, but another bank might be more lenient.

I'm not a lender, but if I was a bank I would be making a conservative interpretation of the rule, so that I don't jeopardize the 75% principal guarantee from the SBA.
commentor profile
Reply by an investor
from University of Oxford in Austin, TX, USA
I think this is really going to depend on how far each bank's interpretation goes. If you interpret this change to the fullest, then you have to unravel every entity up to it's beneficial owner...which would include looking at LPs of funds. I've already seen the situation you describe cause a failed deal, but another bank might be more lenient. I'm not a lender, but if I was a bank I would be making a conservative interpretation of the rule, so that I don't jeopardize the 75% principal guarantee from the SBA.
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