{"ok":true,"canonical_url":"https://dealroom.so/glossary/passive-entity","api_url":"https://dealroom.so/api/public/glossary/passive-entity","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-entity","term":"Passive entity","group":"The loan itself","definition":"A business or trust that doesn't actively conduct trade or business, primarily holding assets like real estate or equipment. The SBA generally won't lend directly to these.","what_it_means":"For an SBA 7(a) loan, the operating business must be the borrower. A passive entity might own the real estate, but it would lease it to the operating company, and both entities would be co-borrowers or co-applicants.","url":"https://dealroom.so/glossary/passive-entity","official_sources":[{"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"},{"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"}],"related":[{"slug":"co-borrower","term":"Co-borrower","url":"https://dealroom.so/glossary/co-borrower"},{"slug":"investment-business","term":"Investment business","url":"https://dealroom.so/glossary/investment-business"},{"slug":"owner-occupied-commercial-real-estate","term":"Owner-occupied commercial real estate","url":"https://dealroom.so/glossary/owner-occupied-commercial-real-estate"}],"related_questions":[{"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":"Can the personal guaranty be limited for certain passive investors or minority owners?","url":"https://dealroom.so/sba-7a/questions/can-the-personal-guaranty-be-limited-for-certain-passive-investors-or-minority-owners"},{"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":"Can an SBA 7(a) loan be used to buy stock or passive investments?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-be-used-to-buy-stock-or-passive-investments"},{"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"}]},"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 entity","url":"https://dealroom.so/glossary/passive-entity","source_type":"DealRoom Data"}}