Convertible Note Template

The term sheet is a simple manifestation of the terms to be discussed and negotiated between the lender and the borrower. It is generally not a contract, per se, but a tool. It is an unenforceable document used during negotiations to facilitate the parties’ discussion of the most important terms of their agreement in plain language before reducing those terms to legalese, which can otherwise complicate negotiations.

You should view your Convertible Debt Term Sheet as a practical tool that can aid the parties’ shared goal of coming to a “meeting of the minds” pursuant to which the enforceable convertible note purchase agreement and convertible note are to be prepared as a final step in facilitating the contemplated investment.

The convertible note purchase agreement articulates the conditions by which the transaction will close and certain representations made by the parties for regulatory purposes.

The convertible promissory note is the means by which the lender may either enforce its right to be paid back by the borrower or convert the debt into equity, as dictated by the terms to which the parties agreed and the context present at the time of such repayment or conversion.

Upon execution of these documents, the final step in the process is for the lender to remit the funds to the borrower for use in the borrower’s business.