Capital

Capital

– (net worth) is the financial strength of the risk that would be available in case of the inability or unwillingness of the individual to pay the obligations when due. It’s like a pillow to comfort your lender. Your net worth is the amount of assets that exceed your liabilities. This is not math, just arithmetic.

Capital is generally recognized as cash, paid-in-capital, or retained earnings. Your contribution is called “skin in the game”. Anything else is called “blue sky” and not credible to a lender. Remember, this is for a small business, not a Fortune 100 company.

If you have a rich uncle, you do not need to read this any longer.

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