# Convertible Note

**IRI:** https://folio.openlegalstandard.org/RCUPRwxWXJ35yaRIp8mP8Sh

## Labels

**Preferred Label:** Convertible Loan

**Alternative Labels:**

- Convertible Debt

## Definition

A Convertible Note is a form of short-term debt that converts into equity, usually in conjunction with a future financing round. The investor lends money to a startup and instead of getting the money back with interest, the investor receives equity in the company. Each convertible note is usually an unsecured, short-term debt instrument that converts into equity — typically preferred shares — under specified conditions, such as a future funding round. The conversion to equity can be mandatory in some conditions or elective in others.

## Sub Class Of

- https://folio.openlegalstandard.org/R7xqVevh0JKSwX977TRIZQV
- https://folio.openlegalstandard.org/R8x0u39yCNHqlqk08vu3PPb
- https://folio.openlegalstandard.org/RCAIUgUHLdwFdtdPTruyEgL

**Deprecated:** False