Glossary · People and paperwork
In short
This means you own part of a business but aren't actively involved in its daily operations or management. The SBA has specific rules about who can be a passive owner in a 7(a) deal.
For an SBA loan, all owners with 20% or more equity must personally guarantee the loan, even if they're passive. If you're buying a business with partners who won't be active, ensure they understand their guaranty obligations. The SBA generally wants active management for 7(a) businesses.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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