{"ok":true,"canonical_url":"https://dealroom.so/glossary/non-passive-activity","api_url":"https://dealroom.so/api/public/glossary/non-passive-activity","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":"non-passive-activity","term":"Non-passive activity","group":"Reading the business","definition":"This means the buyer must be actively involved in the day-to-day operations of the business. The SBA wants owners who run their businesses, not just invest in them, to ensure loan repayment capacity.","what_it_means":"For an SBA 7(a) loan, you must be an owner-operator. This means you can't just hire a manager and walk away; you need to be working at least 500 hours per year or 50% of the time, whichever is less. Your lender will verify your plans for active involvement, so be clear on your role.","url":"https://dealroom.so/glossary/non-passive-activity","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":"sba","term":"SBA","url":"https://dealroom.so/glossary/sba"},{"slug":"7a-loan","term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"},{"slug":"key-principal","term":"Key principal","url":"https://dealroom.so/glossary/key-principal"}],"related_questions":[{"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":"What are the specific conditions for a seller to retain a passive, non-controlling minority stake in an SBA 7(a) acquisition?","url":"https://dealroom.so/sba-7a/questions/what-are-the-specific-conditions-for-a-seller-to-retain-a-passive-non-controlling-minority"},{"question":"What constitutes an ineligible business for an SBA 7(a) loan based on activity?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-an-ineligible-business-for-an-sba-7-a-loan-based-on-activity"},{"question":"What are the consequences if the NAICS code entered into E-Tran differs from the primary business activity in the loan narrative?","url":"https://dealroom.so/for-lenders/questions/what-are-the-consequences-if-the-naics-code-entered-into-e-tran-differs-from-the-primary-b"},{"question":"What if the acquired business primarily generates revenue from passive rental income?","url":"https://dealroom.so/sba-7a/questions/what-if-the-acquired-business-primarily-generates-revenue-from-passive-rental-income"},{"question":"What constitutes \"passive income\" disqualifying a business from 7(a) loan eligibility?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-passive-income-disqualifying-a-business-from-7-a-loan-eligibility"}]},"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 — Non-passive activity","url":"https://dealroom.so/glossary/non-passive-activity","source_type":"DealRoom Data"}}