{"ok":true,"canonical_url":"https://dealroom.so/glossary/passive-activity","api_url":"https://dealroom.so/api/public/glossary/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":"passive-activity","term":"Passive Activity","group":"The loan itself","definition":"This describes business operations where the owner does not materially participate, such as simply owning rental property. SBA loans are generally not permitted for such activities.","what_it_means":"Similar to passive investment, the SBA requires active owner involvement. If the business you're acquiring is primarily a landlord operation or relies solely on passive income streams without active management, it won't qualify for a 7(a) loan. You must show you're taking on an active management role.","url":"https://dealroom.so/glossary/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":"passive-investment","term":"Passive Investment","url":"https://dealroom.so/glossary/passive-investment"},{"slug":"speculation","term":"Speculation","url":"https://dealroom.so/glossary/speculation"},{"slug":"ineligible-businesses-rule","term":"Ineligible businesses rule","url":"https://dealroom.so/glossary/ineligible-businesses-rule"},{"slug":"7a-loan","term":"7(a) loan","url":"https://dealroom.so/glossary/7a-loan"}],"related_questions":[{"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"},{"question":"How does a lender determine if a borrower's business is engaged in a \"speculative\" activity and thus ineligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-determine-if-a-borrower-s-business-is-engaged-in-a-speculative-activity-"},{"question":"What is the specific impact if the NAICS code entered into E-Tran differs from the primary business activity described in the loan narrative?","url":"https://dealroom.so/for-lenders/questions/what-is-the-specific-impact-if-the-naics-code-entered-into-e-tran-differs-from-the-primary"}]},"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 — Passive Activity","url":"https://dealroom.so/glossary/passive-activity","source_type":"DealRoom Data"}}