Convertible Promissory Note US

Custom Made Convertible Promissory Note (US) Template

This convertible note is a debt instrument used by early-stage investors looking to fund an early-stage startup that is not ready for valuation. It is used to prevent substantial dilution to founders in the early stages and to avoid tricky tax and legal issues.

Once the startup is established and its value is considerably clearer, investors would have the option to exchange (convert) their notes into equity depending on the terms of the convertible note.

Convertible notes are great for startups because they allow you to focus on growing your business before you have to start paying back debt. On the other hand, it also benefits investors because they believe the company will experience a lot of growth, and equity in the startup will ultimately be worth more than the interest on the debt.

Download Custom Template

Preview Convertible Promissory Note Template

Get The Template now

About The Convertible Promissory Note Template

This Convertible Note template is prepared for US-registered companies and is made specifically in accordance with Delaware laws and regulations. It has been carefully vetted by lawyers with qualifications in multiple jurisdictions, including the US, and extensive experience in business management and structuring and working with some of the fastest-growing technology companies in the ecosystem.

It is written in simple, comprehensive grammar that is easy to understand by founders and entrepreneurs. Unlike legal agreements filled with complicated legal words, the legal terms in this template have been broken down and explained using terms that can be read and understood by anyone.

Information You Need in This Convertible Promissory Note

To fill out this agreement to your needs, here is some information that will be asked of you in the form:

- The legal name and address of the holder of the note
- Name, address, and business of the company
- The principal amount of the note, i.e., the amount being invested
- The interest rate due on the note
- The minimum equity financing threshold for conversion.
- The discount rate at which the holders’ note will convert to equity; if applicable.

Order This Template Now

This Convertible Promissory Note Template contains:

Definition of Terms:

This section defines the terms used in the contract and the context in which they are used to make it easy to correctly interpret rights and obligations under the agreement.

Interest Rate:

A Convertible note is a debt, so there is an interest rate. What makes the note different is that on conversion, the interest is added to the principal amount and converted into equity rather than cash.

Valuation Cap:

This is the minimum equity financing threshold required for the note to convert into equity.

Maturity Date:

The maturity date is the date at which the note will convert or become payable with interest.

Conversion Terms:

These cover the instances in which the note will convert into equity and the terms governing the conversion, such as conversion price, procedure, etc.

Get The Template now

Convertible Promissory Note Template FAQ

Who should be the signatories?
When does it become operational?
Does it require board approval?
Does it require additional legal review?
Does it need to be renewed?
How can it be canceled?

The company or its authorized representative and the investor.

The Convertible Note becomes operational from the date of execution, that is the date when it is signed by both parties to the agreement.

Yes, a Convertible Note requires a board resolution authorizing the investment, made in writing and duly signed before it is executed.

These templates are suggested templates that are created using terms that are simple to understand by anyone. They are a good place to start when entering into a binding contract or agreement. However, this document is not a substitute for legal advice and we recommend that you consult a lawyer before signing legal documents or agreements or seeking legal advice to ensure you are complying with applicable laws and regulations.

No, this agreement does not need to be renewed.

A convertible note is canceled or comes to an end on the maturity date which is provided for in the agreement or on the conversion of the debt to equity if provided for by the agreement.