Committed capital

Definition

Money a backer has contractually agreed to fund when called.

Why It Matters

The word doing the work is committed. An investor who says it has capital available is describing a fund it may raise, an appetite, or a network; one that says its capital is committed has signed for it, and can be called on while you are under a letter of intent. That difference decides whether a seller believes your proof of funds. Ask whether the commitment is signed, what conditions release the backer from it, and how long it stands, because all three are negotiated and none of them is standard.

In numbers: A signed commitment of $1M against a $4M purchase covers the 25% a lender wants; an unsigned indication of the same size covers nothing at all.