What This Convertible Promissory Note Template Covers

This convertible promissory note template is designed for startups seeking financing from investors or lenders. It includes essential clauses such as the Parties involved, Principal Amount, Interest Rate, Maturity Date, Conversion Terms, and Events of Default. These elements ensure that both the borrower and lender have clarity on the terms of the loan and the conditions under which the debt can convert into equity.

When to Use a Convertible Note Agreement

This convertible note agreement is ideal for startup founders looking to secure funding while offering investors the potential for equity in the company. Use this template when:

• You are negotiating terms with an investor who prefers a debt to equity conversion option.
• Your startup requires immediate financing to accelerate growth without diluting ownership upfront.
• You want to establish clear repayment terms while maintaining flexibility for future investment rounds.

What's Included in This Startup Financing Document Template

• Parties: Clearly identifies the Lender and Borrower, ensuring all parties are legally recognized.
• Principal Amount: Specifies the total amount of the loan provided to the startup.
• Interest Rate: Outlines the interest rate applicable to the loan, crucial for calculating repayment obligations.
• Maturity Date: Defines the date by which the loan must be repaid or converted into equity.
• Conversion Terms: Details the conditions under which the loan can be converted into equity, including conversion price and qualifying financing amounts.
• Events of Default: Lists scenarios that would trigger a default, protecting the interests of the lender.

Key Provisions in This Promissory Note for Startups

• Debt to Equity Conversion: This provision allows lenders to convert their loan into equity, providing an incentive for investment.
• Investor Loan Agreement Clarity: Clearly defined terms help prevent misunderstandings between startups and investors.
• Flexible Financing Options: The template offers startups various financing options, accommodating different investor preferences.

Disclaimer: This template is for informational purposes only and does not constitute legal advice.