Recently, the SBA announced the suspension 111,620 California Borrowers. Administrator Kelly Loeffler announced that the agency has suspended California borrowers because of alleged fraudulent activity across SBA pandemic-era loan programs.
Additionally, beginning March 1, the U.S. Small Business Administration (SBA) will prohibit businesses with any legal permanent resident ownership from qualifying for SBA-backed loans. Under the new policy, 100 percent of all direct and indirect owners of a loan applicant must be U.S. citizens or U.S. nationals residing in the United States or its territories. This represents a significant reversal of longstanding SBA eligibility rules and directly affects immigrant-founded and immigrant-owned businesses nationwide.
Do these updates affect my business?
If your business (worker cooperative or otherwise) is in the state of California, Minnesota, or you have owners who have legal permanent residence but do not have a social security card, this may affect your businesses, though it is unlikely to result in action. This is a suspension of borrowers for future loans rather than loan guarantees themselves.
Note: SBA guaranteed loans have historically been difficult for worker cooperatives, because they require a personal guarantee for one owner, which is asynchronous with the worker co-op model. Because of this requirement, we expect that the impact on the worker co-op sector will be low. If you do experience any issues, please reach out to policy@usworker.coop as soon as possible; our team can help you to navigate this issue or connect you with partners who can.
What should I do?
It is unclear the extent that the SBA has resources to investigate loans; however if your loans are in good standing, the USFWC does not believe there is cause for worry that loans will be recalled. However each individual organization should weigh risks internally and in communication with your lender, regardless of legal entity or geography.
If you currently have an Economic Injury Disaster Loan or a Paycheck Protection Program grant that was guaranteed through the SBA, please reach out to the USFWC at policy@usworker.coop if you receive any communications from the SBA. As of Feb 26, 2026 we do not expect that these loans will be affected as long as loans are being repaid on time. It is unclear what the suspension itself entails; however any borrowers named on loans that are not being paid on time may be subject to extra scrutiny, so the USFWC advises organizations to ensure these loans remain in good standing. Additionally, if you have received one of these loans, the USFWC advises caution in applying for further loans through the SBA.
If you do NOT currently have a loan guaranteed through the SBA: the USFWC advises caution in applying for further loans through the SBA.
If you are unsure if your loan has a guarantee through the SBA, contact your lender, who will have that information.
