{"ok":true,"canonical_url":"https://dealroom.so/glossary/passive-business","api_url":"https://dealroom.so/api/public/glossary/passive-business","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-business","term":"Passive Business","group":"Reading the business","definition":"A business where the owner is not actively involved in day-to-day operations or management. The SBA generally does not lend to passive businesses, as they require owner-operators.","what_it_means":"The SBA 7(a) program is designed for active owner-operators. Businesses primarily generating income from passive activities like real estate rentals (unless operating a hotel/motel), investment properties, or lending are typically ineligible. Ensure the business you are acquiring requires and supports your active management.","url":"https://dealroom.so/glossary/passive-business","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":"ineligible-businesses-rule","term":"Ineligible businesses rule","url":"https://dealroom.so/glossary/ineligible-businesses-rule"},{"slug":"owner-occupied-commercial-real-estate","term":"Owner-occupied commercial real estate","url":"https://dealroom.so/glossary/owner-occupied-commercial-real-estate"},{"slug":"small-business","term":"Small business","url":"https://dealroom.so/glossary/small-business"},{"slug":"naics-code","term":"NAICS code","url":"https://dealroom.so/glossary/naics-code"}],"related_questions":[{"question":"Do businesses that primarily generate passive income qualify for an SBA 7(a) loan?","url":"https://dealroom.so/sba-loans/basics/do-businesses-that-primarily-generate-passive-income-qualify-for-an-sba-7-a-loan"},{"question":"Are there any businesses that are considered 'passive' and cannot get an SBA 7(a) loan?","url":"https://dealroom.so/sba-loans/basics/are-there-any-businesses-that-are-considered-passive-and-cannot-get-an-sba-7-a-loan"},{"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":"Will acquiring a business in a restricted industry (e.g., gambling, passive investing) kill approval?","url":"https://dealroom.so/sba-7a/questions/will-acquiring-a-business-in-a-restricted-industry-e-g-gambling-passive-investing-kill-app"},{"question":"How does the SBA define an 'ineligible business' for 7(a) loan purposes regarding passive income?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-define-an-ineligible-business-for-7-a-loan-purposes-regarding-passive-inc"}]},"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 Business","url":"https://dealroom.so/glossary/passive-business","source_type":"DealRoom Data"}}