{"ok":true,"canonical_url":"https://dealroom.so/glossary/eligible-passive-company","api_url":"https://dealroom.so/api/public/glossary/eligible-passive-company","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"eligible-passive-company","term":"Eligible Passive Company","aka":"EPC","group":"The loan itself","definition":"An EPC is a business that doesn't operate a trade but leases its assets, often real estate, to an operating company. The SBA allows these structures to separate property ownership from business operations.","what_it_means":"In an SBA 7(a) deal, the EPC (often the buyer's new entity) might own the real estate and lease it to the operating business. The EPC must be a co-borrower on the loan, and both entities' financials are reviewed for eligibility and repayment capacity. Understand this structure as it affects your legal entities and loan documents.","url":"https://dealroom.so/glossary/eligible-passive-company","official_sources":[{"slug":"13-cfr-part-120","title":"13 CFR Part 120 — Business Loans","official_url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120","official_label":"View on eCFR","authority_tier":1,"publisher":"Office of the Federal Register","source_guide_url":"https://dealroom.so/sba-7a/sources/13-cfr-part-120"},{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"7a-loan","term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"slug":"owner-occupied-commercial-real-estate","term":"Owner-occupied commercial real estate","url":"https://dealroom.so/glossary/owner-occupied-commercial-real-estate"},{"slug":"lease-agreement","term":"Lease agreement","url":"https://dealroom.so/glossary/lease-agreement"},{"slug":"co-borrower","term":"Co-borrower","url":"https://dealroom.so/glossary/co-borrower"}],"related_questions":[{"question":"Can an SBA 7(a) loan be used to acquire a business that is primarily an investment or passive real estate holding company?","url":"https://dealroom.so/for-lenders/questions/can-an-sba-7-a-loan-be-used-to-acquire-a-business-that-is-primarily-an-investment-or-passi"},{"question":"What is the maximum percentage of passive income a business can generate to remain 7(a) eligible?","url":"https://dealroom.so/for-lenders/questions/what-is-the-maximum-percentage-of-passive-income-a-business-can-generate-to-remain-7-a-eli"},{"question":"Can a business primarily generating passive income from non-owner-occupied commercial real estate rentals be 7(a) eligible?","url":"https://dealroom.so/for-lenders/questions/can-a-business-primarily-generating-passive-income-from-non-owner-occupied-commercial-real"},{"question":"Are business life insurance premiums generally tax deductible for the company?","url":"https://dealroom.so/sba-7a/questions/are-business-life-insurance-premiums-generally-tax-deductible-for-the-company"},{"question":"Can an SBA 7(a) loan help me acquire another company?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-help-me-acquire-another-company"},{"question":"What distinguishes a company redemption from a cross-purchase buyout for SBA?","url":"https://dealroom.so/sba-7a/questions/what-distinguishes-a-company-redemption-from-a-cross-purchase-buyout-for-sba"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Eligible Passive Company","url":"https://dealroom.so/glossary/eligible-passive-company","source_type":"DealRoom Data"}}