Understanding Hard Cap in Private Equity

Hard Cap is a form of cap that applies to financing in [Private Equity](/en/blog/quest-ce-que-le-private-equity-pe), among others. This refers to the maximum amount, in capital, that investors are able to subscribe to a round of financing. Once the Hard Cap has been reached, investments are completed, and additional money is not accepted.

A Hard Cap often has consequences for the overall financing round. Failure to reach it can affect share prices or the capital-labour ratio. However, Hard Cap is not always necessary and is often left to the discretion of investors.

Hard Cap is a tool commonly used in [Private Equity](/en/blog/quest-ce-que-le-private-equity-pe) to limit the total capital contribution and ensure that the financing reaches its full potential. There are usually exclusions and rules about Hard Cap that can be discussed between investors and the promoter.

Finally, it's important to note that Hard Cap is different from the capital cap, which is the maximum amount investors can bear in capitalization costs. Hard Cap is a way for investors to limit their risk, and for developers to ensure that their financing efforts are competitive.