Convertible Note

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Home Startup Terms Glossary Convertible Note

What is a Convertible Note?

Convertible notes are short-term loans that convert to equity. Noteholders generally receive interest payments in the form of equity ownership shares in place of scheduled payments. Startups rely upon convertible notes in their early funding stages for a seed round closing and later stages when they need to use bridge funding in between projects.

Convertible Note Examples

Examples of convertible note components include:

  • Example 1. Maturity dates
  • Example 2. Interest rates
  • Example 3. Valuation caps
  • Example 4. Conversion discounts

Here’s another web page about convertible notes.

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