Convertible Note Cost

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 1,850 reviews

Jump to Section

Need help with a Convertible Note?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

How much does a convertible note cost? A convertible note is one kind of short-term debt that eventually converts into equity. When using a convertible note, an investor lends money to a startup as its first round of financing. Instead of repayment of the loan with interest, the investor receives shares of preferred stock in the company.

Convertible notes are appealing to investors because the investor doesn't have to determine the value of the company until after a future financing round when there is more data to base valuation.

Like any loan, a convertible note comes with terms and a legal agreement between the investor and the startup company. Many investors want to ensure that their convertible note agreement is drafted correctly, so a common question is how much convertible notes cost. Let's explore this question and go over some general information about convertible notes.

How Much Does a Convertible Note Cost?

Many business owners choose to hire a business or securities lawyer to draft a convertible note agreement to ensure that the agreement is legally binding and enforceable.

Various factors will affect the cost of a convertible note agreement, including the complexity of the note terms and the location where the investor and company are located.

Many investors consider the advantages and disadvantages of a convertible note before hiring a lawyer to draft the agreement and lend money to a company.

Some advantages of investing using a convertible note include:

  • Simplicity. Convertible notes are a quick and simple form of financing for investors and companies.
  • Delayed Valuation. Delayed valuation benefits both parties because a new company seeking financing doesn't have enough data to value their company for equity. An investor often ends up with a discount on securities.

Before investing with a convertible note, investors should also be aware of the following disadvantages:

  • Startup Company Fails. If the startup company fails to raise additional equity financing when the convertible note matures, the company will not have the income to pay the loan or stock to issue to the investor.

As with all investments, using a convertible note carries a degree of risk for an investor.

Based on ContractsCounsel's marketplace data, the average cost of a convertible note is $595.

Key Terms of a Convertible Note

The terms within a convertible note may vary based on the agreement reached between the company and the investor. When evaluating a convertible note, the following key terms should be addressed:

  1. Discount Rate. It is common for investors to benefit from an additional discount on the price of shares. This is a way to compensate the investor for their financial risk. The discount on shares can be used in the subsequent financing round.
  2. Valuation Cap. The valuation cap, which may also be called a conversion cap, is the price at which the note will convert into equity. When the valuation cap is lower, it benefits the investor more.
  3. Interest Rate. It is typical for convertible notes to accrue interest. Rather than repayment in cash, the investor is given additional shares when the convertible note converts to equity.
  4. Maturity Date. The maturity date designates the date that the note is due, and then the company must repay it.

Do You Pay Interest on a Convertible Note?

Yes. Convertible notes do earn investors' interest. The interest rate is typically low and will range from around 2% up to about 8%. Unlike a traditional loan where interest is paid with loan repayments, convertible note interest is paid by issuing additional stocks.

Looking for an alternative to a convertible note? Learn about SAFE Notes.

Examples of Convertible Note Projects

Convertible Note Drafting

Many startups need capital early on from investors to get up and running. Convertible notes are great options to use given the startup doesn’t need to go through a ‘priced round’, which would involve getting a valuation and selling shares.

A startup founder may pay a lawyer to draft a convertible note with custom terms they can use between the startup and the investor to secure funding. This is a more seamless way of getting funding into a startup without haggling over valuation.

An experienced lawyer can draft an effective convertible note that includes all the necessary core terms and any additional conditions the parties wish to add.

Convertible Note Review

On the flip side, an investor that is interested in putting money into a startup may receive a convertible note agreement to sign. This investor may have an interest in hiring a lawyer to review the convertible note agreement before signing, so they can make sure all of the terms and language is fair and understood.

Before signing any agreement involving a sizable transaction, it is always wise to have a lawyer review the legal language to make sure you are best protected from future disputes.

Convertible Note Disputes

Like any situation involving a legal contract, especially a contract involving large sums of investment money, disputes can arise between parties.

The best way to avoid a dispute is to have an iron-clad agreement drafted by an experienced attorney. If a dispute does arise, either party can hire an attorney to represent them in the legal dispute over the convertible note. This lawyer may help an investor recover money from a startup that acted in bad faith.

Meet some lawyers on our platform

Jane C.

60 projects on CC
View Profile

Gregory B.

35 projects on CC
View Profile

Paul S.

7 projects on CC
View Profile

Terence B.

43 projects on CC
View Profile

Drafting a Convertible Note Cost

If an investor wishes to hire a lawyer to draft a convertible note, the investor will have to pay for the lawyer's time and services.

According to ContractsCounsel's marketplace data, the average convertible note drafting costs are $663 across all states.

Reviewing a Convertible Note Cost

If an investor chooses to draft their own convertible note and just wants a lawyer to review the contract before signing, the investor will still incur legal fees, but document review is typically less expensive than drafting.

ContractsCounsel's marketplace data shows the average convertible note review costs to be $481 across all states.

How Do Lawyers Charge for a Convertible Note?

Lawyers typically bill clients using one of two popular fee structures: hourly rate or flat fee. The pay schedule will depend on the attorney's preference and the type of project they are hired to complete. The client must agree to the price and the fee structure before the attorney begins work on a project.

Hourly Rates for a Convertible Note

An hourly rate fee structure is the most common fee structure used by attorneys. The lawyer will provide a client with their hourly rate, and then after the project is complete, bill the client for the number of hours spent working on the project.

The marketplace data for ContractsCounsel shows the average hourly rate for a fundraising lawyer range from $250 - $400 per hour.

Flat Fee Rates for a Convertible Note

Flat fee payment structures are becoming more common, especially when a lawyer is hired for a specific job or project, like drafting a convertible note rather than an ongoing case.

Using this fee structure, the lawyer quotes the client a flat rate fee rate to complete a particular project or job.

Even if a flat fee rate is used, lawyers may charge additional fees for revisions or reviewing the document.

ContractsCounsel's marketplace data shows the average flat fee rate for convertible note costs to be $595.

Get Help with a Convertible Note

Do you need help with a convertible note project? If so, post a project in ContractsCounsel's marketplace to receive flat fee bids from fundraising lawyers to handle your project. All lawyers on the ContractsCounsel's platform are vetted by our team to make sure you are provided with top-tier service.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

ContractsCounsel verified
Principal Attorney
18 years practicing
Free Consultation

Daliah Saper operates a cutting-edge internet and social media law practice that regularly leads local and national media outlets to solicit her commentary on emerging internet law issues involving cyberbullying, sexting, catfishing, revenge porn, anonymous online defamation, domain name and user-name squatting, privacy, and the latest business decisions made by social media platforms such as Facebook, Twitter and YouTube. As a litigator Daliah represents companies bringing or defending business and intellectual property disputes. (She has argued cases in a number of jurisdictions including taking a case all the way to the Illinois Supreme Court.) As a transactional lawyer she helps clients choose the right business entity, drafts contracts and licensing agreements, advises on sweepstakes and contest rules, and ensures website terms of use and privacy policies are compliant, and provides comprehensive trademark and copyright counseling. Since founding Saper Law Offices in 2005, Daliah has been named a 40 Under 40 by Law Bulletin Publishing Co., a top Media & Advertising attorney by Super Lawyers Magazine 14 years in a row, and has been repeatedly recognized as a leading media and entertainment lawyer by Chambers and Partners. For the past eleven years, she also has taught entertainment and social media law at Loyola University Chicago School of Law.

ContractsCounsel verified
11 years practicing
Free Consultation

Mr. Mehdipour attended the University of California San Diego where he received his degree in political science. After graduating from UCSD, Mr. Mehdipour attended Southwestern University School of Law where he received his JD. Upon passing the bar, Mr. Mehdipour gained invaluable experience both in a law firm and business setting. Mr. Mehdipour uses his prior business and legal experiences to negotiate the most advantageous results for his clients.

ContractsCounsel verified
15 years practicing
Free Consultation

Alen Aydinian is a versatile attorney with over a decade of experience working with business owners and real estate professionals. Client engagement is central to a successful attorney/client relationship. Alen personally manages all client relationships so that his clients can see how their interests are being served at every stage of the process.

ContractsCounsel verified
Founder, Victrix Legal LLC
1 year practicing
Free Consultation

I help small business owners build and protect their dreams. I always thought that I would just be a litigator. Then I joined an intellectual property clinic in law school. We were helping nonprofits and small businesses reach their goals. I fell in love with the work and decided to open my own firm so I could keep helping them. When I decided to start Victrix Legal, I decided that it would be a modern law firm designed to serve professionals. It would be different from every other law firm. In my experience, my law firms are designed to promote inefficiency and reactionary lawyering. Because in most firms, you make more money when you spend more time on a project. And you lose money if your client doesn't get sued. In my opinion, that's a built-in conflict of interest. My firm is different. I use flat fees for most basic projects to keep costs predictable for you and incentivize efficiency. I offer long-term advisory plans and legal audits to prevent issues from happening. I want my clients to see me as their business partner, not just the guy they call when they are in trouble. If any of that interests you, please reach out to me. I offer free consultations. Let's set aside some time and talk about what your legal needs are.

ContractsCounsel verified
8 years practicing
Free Consultation

My clients know me as more than just an attorney. First and foremost, my background is much broader than that. Prior to attending the Valparaiso University School of Law, I earned a Master of Business Administration and ran a small business as a certified public accountant. Thanks to this experience, I possess unique insight which in turn allows me to better assist my clients with a wide range of business and tax matters today. In total, I have over 20 years of experience in financial management, tax law, and business consulting, and I’m proud to say that I’m utilizing the knowledge I’ve gained to assist the community of Round Rock in a variety of ways. In my current practice, I provide counsel to small to medium-sized businesses, nonprofit organizations, and everyday individuals. Though my primary areas of practice are estate planning, elder law, business consulting, and tax planning, I pride myself on assisting my clients in a comprehensive manner. Whenever I take on a new client, I make an effort to get to know them on a personal level. This, of course, begins with listening. It is important that I fully understand their vision so I can help them successfully translate it into a concrete plan of action that meets their goals and expectations. I appreciate the individual attributes of each client and know firsthand that thoughtful, creative, and customized planning can maximize both financial security and personal happiness. During my time as a certified public accountant, I cultivated an invaluable skill set. After all, while my legal education has given me a deep understanding of tax law, I would not be the tax attorney I am today without my background in accounting. Due to my far-reaching experience, I am competent in unraveling even the most complex tax mysteries and disputes. My CPA training benefits my estate planning practice, too. In the process of drafting comprehensive wills and trusts, I carefully account for every asset and plan for any tax burdens that may arise, often facilitating a much smoother inheritance for the heirs of my clients. Prior to becoming certified as a CPA, I made sure to establish a solid foundation in business both in and out of the classroom, and the acumen I’ve attained has served me well. Not only am I better able to run my own practice than I otherwise would be; I am able to help other small business owners fulfill their dreams, as well.

ContractsCounsel verified
6 years practicing
Free Consultation

Hello! I am a young attorney with four years' experience in real estate transactions, fund formation, and general corporate transactional work. I graduated in 2016 from the University of Texas - Austin and I am barred in Texas.

ContractsCounsel verified
Partner Attorney
13 years practicing
Free Consultation

I graduated from the University of Illinois at Urbana-Champaign in 2006 with a degree in Political Science, Finance, and Economics. I stayed around Champaign for law school and graduated in 2009. I then worked at a big law firm in downtown Chicago. It was boring, so I quit in early 2011. I thought that I could not be happy practicing law - I was wrong. After I quit the traditional law firm life, I began representing my own clients. I realize now that I love helping normal people, small business owners, and non-profits address a variety of legal issues. I hope to hear from you.

ContractsCounsel verified
6 years practicing
Free Consultation

I graduated from Harvard Law School and worked first for a federal judge and then a leading DC firm before starting a firm with a law school classmate. My practice focuses on company formations, early-stage investments, and mergers & acquisitions.

ContractsCounsel verified
24 years practicing
Free Consultation

Anna is an experienced attorney, with over twenty years of experience. With no geographical boundaries confining her practice, Anna works on corporate, healthcare and real estate transactions. Anna brings extensive big firm experience, garnered as an associate in the Miami office of the world's largest law firm, Baker and McKenzie, and the Miami office of the international law firm Kilpatrick Townsend. Her areas of expertise include: mergers and acquisitions, initial public offerings, private placements, healthcare transactions, corporate finance, commercial real estate transaction and acting as a general corporate counsel. Anna is certified to practice law in Florida and was admitted to the Florida Bar in 1998. Anna is also a Certified Public Accountant. She passed May 1995 CPA Exam on the first sitting. She is fluent in Russian (native).

ContractsCounsel verified
11 years practicing
Free Consultation

G'day, my name is Michele! I work with startups, entrepreneurs and small/medium-sized businesses across the country in a wide array of industries. I help them with all of their ongoing, daily legal needs. This includes entity formation, M&A, contract drafting and review, employment, asset sale & acquisition, and business sales or shareholder exits. I'm half-Australian, half-Italian, and I've lived the last 20+ years of my life in America. I've lived all over the USA, completing high school in the deep south, graduating cum laude from Washington University in St. Louis, and then cum laude from Georgetown University Law Center. After law school I worked for the Los Angeles office of Latham & Watkins, LLP. After four intense and rewarding years there, I left to become General Counsel and VP of an incredible, industry-changing start-up called Urban Mining Company (UMC) that manufactures rare earth permanent magnets. I now work for Phocus Law where I help run our practice focused on entrepreneurs, startups, and SMEs. I love what I do, and I'd love to be of help! My focus is on providing stress-free, enjoyable, and high-quality legal service to all of my clients. Being a good lawyer isn't enough: the client experience should also be great. But work isn't everything, and I love my free time. I've been an avid traveler since my parents put me on a plane to Italy at 9-months old. I'm also a music nut, and am still looking for that perfect client that will engage me to explain why Dark Side Of The Moon is the greatest album of all time. Having grown up in a remote, and gorgeous corner of Australia, I feel a strong connection to nature, and love being in the elements.

ContractsCounsel verified
9 years practicing
Free Consultation

Attorney Greg Corbin is the founder and principal of Signal Law in Denver, Colorado. A top-rated trial and transactional lawyer with more than seven years of total legal experience, Mr. Corbin provides exceptional counsel and support to clients across the greater Denver metro and surrounding areas who have legal needs involving any of the following: business and corporate law; contracts and agreements; incorporations, partnerships and other entity formation and dissolution services; and ongoing business counsel for emerging and expanding commercial enterprises. Utilizing the latest in cost-saving technologies and advanced automation, Mr. Corbin has established his practice as a modern law firm ready for the future, and he strives to provide the highest level of representation to his clients and help them achieve their goals and the favorable outcomes they seek as efficiently and cost-effectively as possible. He has gained a reputation for his innovative solutions as well as his transparent pricing structure and responsiveness when dealing with his clients. In recognition of his outstanding professionalism and service, Mr. Corbin has earned consistent top rankings and endorsements from his peers as being among the top lawyers in his region for business law and transactions. A 2008 graduate of Kansas State University, Mr. Corbin obtained his Juris Doctor from Boston University School of Law in 2013. The Massachusetts Bar Association admitted him to practice that same year, and the Colorado State Bar Association admitted him in 2015. Mr. Corbin is an active member of the Denver Bar Association and the Colorado State Bar Association, among his other professional affiliations, and he supports his local community through his involvement with Project Worthmore and Biking for Baseball, where he serves on the boards of directors.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call