Patient capital

Patient capital is money a small or medium-sized private business raises. Its name refers to its lenient repayment terms. Because it is often raised through family or friends it is sometimes called “love money.”

Patient capital can be either debt or equity and often displays one or more of the following features:

• There is no contract spelling out payments of interest, principal or dividends
• The lender does not get any ownership of the company
• No collateral is used as security
• The debt could be forgiven

More about patient capital

One distinct type of patient capital is a “subrogated shareholder loan,” which has the same lenient terms as standard patient capital but is provided by a shareholder rather than friends or family. The shareholder signs a subrogation agreement that defines the money as patient capital, which banks will consider when calculating how much more debt the company can take on.