Kim Lisa TaylorSecurities Attorney, Founder, Syndication Attorneys, PLLC · Corporate Securities Attorney, 2x Best-Selling Author, Nationwide Speaker | Private Placement

Why You Shouldn't Ignore Capital Calls in Investments

30 Apr 2024 · 0 min

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In this brief advisory segment, the speaker urges passive investors who receive a capital call—typically an additional 10% contribution—to comply promptly. He explains that failing to meet the call can result in the total loss of the investment, whereas providing the extra funds increases the likelihood that the deal can survive current market pressures. The added capital may enable the sponsor to ride out high interest rates, secure new financing, or find a buyer at a reasonable price, ultimately allowing investors to recover their full investment and potentially earn a return.

My advice to people, if any of you are invested passively in a deal and they're asking you for a capital call, is to do it. Because if you don't, then likely you're going to lose your entire investment. If you put in the extra 10% that they're asking you, there's a likelihood that they're going to be able to pull it off, ride out this wave until the interest rates improve and they can get a new loan or they can get a buyer at a reasonable price and you end up getting all of it back plus.