SBA 7(a) Q&A
Short answer
A 'passive business' is generally ineligible if its primary purpose is to hold property for investment, rent it to others, or engage in speculative activities rather than actively operating a trade or business.
SBA loans are for active, operating small businesses. A business that primarily earns income from passive activities, like owning and leasing commercial real estate (without providing substantial services) or generating revenue from investment vehicles, is ineligible. The business must actively produce goods or services.
A buyer wants to purchase a company whose sole asset is a commercial building, and its only income is rent from three long-term tenants with minimal landlord involvement. This would likely be considered a passive business and ineligible for an SBA 7(a) loan, as it's primarily an investment vehicle.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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