Look for trigger events, notice period, default remedies, dilution, sponsor contribution, alternatives, and reserve policy.
Plain-English term
Capital call
A request for more investor capital after the original raise.
Definition that survives review
A capital call asks investors to contribute additional money, usually because the business plan needs more capital than expected. In a real review, translate the term into the cash flow, priority, deadline, tax treatment, status test, or control right it changes.
Use it to understand when more money can be requested and what happens if you do not fund. If you cannot point to the exact document or calculation behind it, you have recognized the vocabulary but not yet understood the deal.
Why it matters
Sometimes it is responsible. Sometimes it is a confession. The difference lives in the reason, documents, and alternatives. This is why the term is not finished until you know who calculated it, what period it covers, and what happens if the friendlier definition is wrong.
A useful glossary entry should show where the word appears, what input changes it, and which connected term changes the answer next: Reserves, DSCR, Operating agreement.
How to use it in diligence
Additional need - available reserves - lender/operating options = capital-call pressure.
A rate-cap replacement, major repair, or cash shortfall can trigger a capital call if reserves are not enough.
Assuming every capital call is fraud or every capital call is normal. Both shortcuts are lazy.
Proof checklist
- The source period, calculation basis, and owner of the number are named.
- The term reconciles to the PPM, operating agreement, lender documents, tax schedule, underwriting model, or verification record.
- The downside version is visible before the optimistic version gets trusted.
Example, trap, question
A rate-cap replacement, major repair, or cash shortfall can trigger a capital call if reserves are not enough.
Assuming every capital call is fraud or every capital call is normal. Both shortcuts are lazy.
- what broke, who else is contributing, what happens if investors do not fund, and whether the sponsor is taking pain too.
- What source document, schedule, or third-party evidence proves this term in this specific deal?
- Which connected term changes the answer next: Reserves, DSCR, Operating agreement?
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