# Can a foreign investor own part of an SBA-financed business?

**Short answer:** No. All entity owners, direct or indirect, must be created, organized or incorporated in the United States, its territories or possessions. The old 5% foreign ownership exception ended March 1, 2026. Source: SOP 50 10 8.1, Sec. A, Ch. 1, Para. F.

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Last checked: 2026-11-08

No. Every direct and indirect entity owner must be created, organized or incorporated in the United States, its territories or possessions. That is SOP 50 10 8.1, Sec. A, Ch. 1, Para. F. Appendix 3 lists a foreign-organized entity as an Ineligible Person.

## The old exception is gone

SBA previously allowed up to 5% ownership by foreign nationals, or by U.S. persons with a principal residence abroad. SBA Policy Notice 5000-876441 rescinded that exception effective March 1, 2026.

## Look through the chain

The lender must enter 100% of direct and indirect owners into the SBA loan system. A U.S. holding company with a foreign parent fails this test. So does a U.S. company with a foreign individual investor above it.

## What the regulation says

13 CFR § 120.110(e) still says businesses in the U.S. owned by aliens may qualify. SBA's SOP and notices now set the stricter rule for 7(a) and 504 loans. Lenders must follow them as Loan Program Requirements (13 CFR § 120.10).

## Related companies

Other businesses that report taxes on the applicant's return are subject to these rules. Affiliates and partly owned subsidiaries that do not report on the applicant's return are not. Foreign affiliates still count toward size (Para. D.4).

## Sources

- [SOP 50 10 8.1, Sec. A, Ch. 1, Para. F (p. 28)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SOP 50 10 8.1, Appendix 3, Ineligible Person (about p. 300)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)
- [SBA Policy Notice 5000-876441 (effective March 1, 2026)](https://legacy.sba.gov/document/policy-notice-5000-876441-update-sop-50-10-8-citizenship-residency-requirements-recission-procedural-notice-5000-872050)
- [13 CFR § 120.110(e)](https://www.ecfr.gov/current/title-13/section-120.110)
- [13 CFR § 120.10](https://www.ecfr.gov/current/title-13/section-120.10)
- [SOP 50 10 8.1, Sec. A, Ch. 1, Para. D.4 (about p. 17)](https://legacy.sba.gov/sites/default/files/2026-10/SOP%2050%2010%208.1%20Technical%20Policy%20Updates%20effective%20%2010.1.2026.docx)