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This document serves as a convertible promissory note where the company promises to pay the investor a principal amount with conditions for automatic conversion into shares of common stock.

How to fill out convertible promissory note

How to fill out Convertible Promissory Note

1. Title the document as 'Convertible Promissory Note'.
2. Include the date of the agreement at the top.
3. Provide the name and address of the borrower.
4. Specify the amount of money being borrowed.
5. State the interest rate applicable to the note.
6. Outline the maturity date when the money is set to be paid back.
7. Describe the conversion features, detailing how the note will convert into equity.
8. Indicate any specific conditions under which the note may convert into equity.
9. Include a section for signatures by both the borrower and lender.
10. Consider adding any necessary legal language or stipulations depending on jurisdiction.

Who needs Convertible Promissory Note?

1. Startups looking for funding to grow their business.
2. Investors wanting to secure an investment with the possibility of equity conversion.
3. Entrepreneurs building relationships with potential investors without giving away equity upfront.
4. Companies seeking alternative financing options without traditional loan structures.

People Also Ask about

What is an example of a convertible note?

Convertible Note Example These notes come with a valuation cap of $5M, a maturity date 2 years from now, and an interest rate of 5%. One year in, you manage to raise a $2M Series A, with a pre-money valuation of $8M and a post-money valuation of $10M.

Is a convertible promissory note a security?

Also known as convertible promissory notes, bridge notes, or convertible debt. Since convertible notes are securities, they must be registered, or qualify for an exemption from registration, under the Securities Act.

How to write a promissory note in English?

What do I need to write a promissory note? Names and contact information of the borrower and lender. Include their full legal names, addresses, and contact numbers — include any co-signers if applicable. Loan details. Collateral (if applicable) Consequences of default. Governing law. Signatures.

What is a convertible promissory note?

A convertible promissory note is a debt instrument that converts into equity of the issuing company upon certain events. Typically, a note would convert into equity in a subsequent equity financing round and perhaps upon the note's maturity or a sale of the company.

What are the disadvantages of a convertible note?

The following are just a couple of the possible disadvantages of using convertible notes as a financing mechanism. If they don't convert, the notes eventually come due. This can result in the end of the startup if the note holders aren't willing to negotiate, and the startup doesn't have the means to pay off the notes.

How does a convertible loan note work?

Convertible loan notes (CLNs), also known as convertible debt notes and convertible debt, are a form of finance provided to businesses that give the investor the option of converting the debt into equity at a future date, often at a discounted rate compared to that offered to new investors.

What is the difference between a note and a promissory note?

While all mortgage notes are promissory notes, not all promissory notes are mortgage notes. A promissory note is a legally binding, written promise from a borrower to repay a loan to their lender. A mortgage note is a document that outlines the terms of a mortgage.

Do you have to pay back a convertible note?

As debt instruments, convertible notes come with an interest rate and a maturity date (when the note expires). If the note hasn't already converted into equity by the maturity date, the company typically is required to repay the noteholder's principal investment plus interest.

For pdfFiller’s FAQs

What is Convertible Promissory Note?

A Convertible Promissory Note is a type of debt instrument that allows the lender to convert the loan amount into equity in the issuing company, typically at a later financing round.

Who is required to file Convertible Promissory Note?

Companies seeking investment through convertible notes must file them, particularly when they involve accredited investors or raise capital under specific regulatory frameworks.

How to fill out Convertible Promissory Note?

To fill out a Convertible Promissory Note, include details such as the principal amount, interest rate, maturity date, conversion terms, and the identities of both the lender and the borrower.

What is the purpose of Convertible Promissory Note?

The purpose of a Convertible Promissory Note is to provide a mechanism for startups to raise funds while allowing investors to convert their debt into equity at a later stage, often simplifying the fundraising process.

What information must be reported on Convertible Promissory Note?

Reporting on a Convertible Promissory Note typically includes the loan amount, interest rate, maturity date, conversion provisions, and any necessary terms of the agreement.