{"ok":true,"canonical_url":"https://dealroom.so/glossary/passive-rental-income","api_url":"https://dealroom.so/api/public/glossary/passive-rental-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-rental-income","term":"Passive rental income","group":"Reading the business","definition":"This is income generated from property rentals where the owner isn't actively involved in daily management. The SBA generally won't lend to businesses primarily generating this type of income.","what_it_means":"The SBA 7(a) program is for active operating businesses, not passive investments. If the business you're buying has rental income, it must be incidental to an active enterprise, like renting out a portion of an owner-occupied building. Ensure the primary business activity meets the SBA's","url":"https://dealroom.so/glossary/passive-rental-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":"active-enterprise","term":"Active enterprise","url":"https://dealroom.so/glossary/active-enterprise"},{"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":"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":"Is a business primarily generating rental income from commercial property eligible for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/is-a-business-primarily-generating-rental-income-from-commercial-property-eligible-for-a-7"},{"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"}]},"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 rental income","url":"https://dealroom.so/glossary/passive-rental-income","source_type":"DealRoom Data"}}