{"ok":true,"canonical_url":"https://dealroom.so/glossary/passive-income","api_url":"https://dealroom.so/api/public/glossary/passive-income","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-income","term":"Passive Income","group":"Reading the business","definition":"Passive income is money earned from an enterprise in which one is not actively involved, such as rental properties or investments. The SBA has rules against funding businesses that primarily generate passive income.","what_it_means":"The SBA 7(a) loan program is designed to support operating businesses that create jobs and contribute to the economy, not for passive investments. If the target business generates a significant portion of its income passively, it might be ineligible for an SBA loan. Ensure the business you're buying is truly an active operating business.","url":"https://dealroom.so/glossary/passive-income","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"}],"related":[{"slug":"ineligible-businesses-rule","term":"Ineligible businesses rule","url":"https://dealroom.so/glossary/ineligible-businesses-rule"},{"slug":"naics-code","term":"NAICS code","url":"https://dealroom.so/glossary/naics-code"}],"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":"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":"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"},{"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"}]},"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 Income","url":"https://dealroom.so/glossary/passive-income","source_type":"DealRoom Data"}}