The specific terms of a convertible note will depend on the negotiations between the company and the investor. Below are some of the most common terms found as part of a convertible note.
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Note Tems: indicate for how many months the note is for before it become mature.
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12-18 Month
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18-24 Month
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24-36 Month
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36-48 Month
- Maturity Date: The maturity date represents the timeline by which the convertible note must be converted into equity or addressed in some way. It’s the point at which the note reaches its full term.
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Conversion Options:
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Convert into Equity (including the cumulative interest): At maturity, the investor has the option to convert the note into equity (usually preferred stock) based on predetermined terms. The accumulated interest may also be converted.
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Extend by Mutual Agreement: If both parties agree, the maturity date can be extended. This provides additional time for the startup to meet its milestones.
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Repaid in Full (including the interest): Alternatively, the startup can repay the convertible note in full, including any accrued interest. This option is less common but allows the startup to settle the debt without issuing equity.
Remember that convertible notes offer flexibility for early-stage funding, allowing startups and investors to navigate valuation challenges. 🌟
