The Trump administration’s decision to restrict a vital loan program for small businesses to U.S. citizens has left some immigrant business owners searching for alternatives.
The Korean American Federation of Los Angeles, KAFLA, recently partnered with the Jewish Free Loan Association to connect small business owners with interest-free loans of up to $50,000 that can be used for startup costs, rent, payroll, inventory, equipment and other business expenses.
In March, the U.S. Small Business Association changed its eligibility rules, excluding lawful permanent residents and requiring businesses seeking SBA-backed loans to be fully owned by U.S. citizens or U.S. nationals.
Immigrant entrepreneurs are more likely than native-born Americans to start a business, according to research from the Massachusetts Institute of Technology. Nearly 40% of California’s small businesses are owned by immigrants, including 11% owned by undocumented entrepreneurs, according to the Bay Area Council Economic Institute. Nearly 60% of California’s 4.3 million small businesses, 60% are owned by entrepreneurs who are Hispanic, Black, Asian American, Pacific Islander or Native American.
“When times get tough, it’s resources like this that currently aren’t available to our committee that are much needed,” KAFLA president Robert Ahn said during an informational session last week.
Applicants must have steady income and meet certain credit requirements. Those seeking more than $10,000 generally need a credit score of at least 680. The program also requires one to three guarantors, depending on the loan amount.
Business owners can borrow up to $7,500 with one guarantor, up to $36,000 with two guarantors and as much as $50,000 with three guarantors.
Applicants must provide documentation including a recent tax return and proof of business licensing. The program accepts applicants with either a social security number or an individual taxpayer identification number, or ITIN.
Rachel Grose, JFLA’s executive director, said the online application takes about 10 minutes to complete. After the initial application is submitted, applicants are scheduled for a Zoom interview with JFLA staff.
Some business owners say the program could help fill a gap in access to capital.
Yong-ho Kim, president of the Korean American Food Industry Association and owner of the Japanese restaurant Arado, said many immigrant entrepreneurs have traditionally relied on bank financing to cover expenses and invest in their businesses.
“But the rules suddenly changed so that SBA loans are only available to citizens. There are many permanent residents, too,” Kim said. “Where are they supposed to borrow money to make up for the gaps?”
Kim acknowledged that the JFLA application process is more demanding than a traditional bank loan because of its guarantor requirements. Still, he says the absence of interest and fees makes it attractive.
Many businesses in the neighborhood, and across the city, are struggling with inflation and higher operating costs, he added.
“It’s very difficult right now,” he said. “Prices keep going up, and I’m constantly thinking about what I need to cut.”
Kim said he personally applied for the program’s maximum $50,000 loan, partly because he needs additional capital and partly because he wanted to experience the process himself before recommending it to others.
Ahn said the partnership grew out of conversations he had with David Horvitz, vice president of JFLA’s board of directors, during a trip to Israel earlier this year.
“We spent a lot of time together in Israel discussing economic issues, particularly the struggles many businesses in Koreatown are facing,” he said.
Founded in 1904, JFLA provides interest-free loans to residents of Los Angeles, Orange, Ventura and Santa Barbara counties.
More information about the program and application requirements is available at jfla.org.
