Glossary · The loan itself
Eligible Passive Company(EPC)
In short
An EPC is a business that doesn't operate a trade but leases its assets, often real estate, to an operating company. The SBA allows these structures to separate property ownership from business operations.
What it means in a deal
In an SBA 7(a) deal, the EPC (often the buyer's new entity) might own the real estate and lease it to the operating business. The EPC must be a co-borrower on the loan, and both entities' financials are reviewed for eligibility and repayment capacity. Understand this structure as it affects your legal entities and loan documents.
Official sources
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.
Related terms
Common questions about Eligible Passive Company
- Can an SBA 7(a) loan be used to acquire a business that is primarily an investment or passive real estate holding company?
- What is the maximum percentage of passive income a business can generate to remain 7(a) eligible?
- Can a business primarily generating passive income from non-owner-occupied commercial real estate rentals be 7(a) eligible?
- Are business life insurance premiums generally tax deductible for the company?
- Can an SBA 7(a) loan help me acquire another company?
- What distinguishes a company redemption from a cross-purchase buyout for SBA?
Defined by CapBench 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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