- May 9, 2021
- Posted by: Robert Brown
- Category: Investing
What is a Convertible Note?
Convertible Note is a short term debt that converts into equity after a certain duration. In a layman language, a convertible note is an agreement that is made between an investor and the organization to which funding is to be made. The convertible note states that a short term debt is being granted which later on, is going to convert into equity. This type of funding is usually used by startups to get an initial stage push.
Benefits of a Convertible Note
- Convertible Notes facilitate investors to quickly invest in the startup they want to invest in.
- No startup valuation is required to issue convertible notes.
- Convertible Note is the easiest way to get funding for a startup.
When & Where should Convertible Notes be Used
Convertible Notes are a good option to fund a startup and there is no doubt in it. In fact, this is the safest way to invest in a startup or any pre-existing business. The only thing one must ensure is that whether the country of the business allows the use of convertible notes or not. In some countries, there are restrictions on using convertible notes.