About This Document
This Convertible Note Term Sheet summarizes the key terms and conditions proposed for a financing arrangement where Investors provide a loan to a Company, which may later convert into equity during a future financing or liquidity event.
It provides a simple, non-binding outline of major deal points before full legal documents are drafted.
Who Should Use This Template
Startups preparing to raise seed or bridge funding via convertible notes
Investors looking for a summary of terms before committing to detailed negotiations
Companies and founders wanting to move quickly on early-stage financing
Legal teams creating a framework for definitive agreements like the Subscription Agreement and Convertible Promissory Note
What the Template Includes
Type of Security: Convertible Promissory Notes with a specified interest rate
Investment Amount: maximum issuance size and minimum commitment for initial closing
Investor Suitability: limited to accredited investors under Regulation D, Rule 506
Closing procedures and timing (Initial Closing and subsequent closings)
Terms of Conversion:
Mandatory conversion at the next Qualified Financing with a discount and/or valuation cap
Voluntary conversion at maturity into common stock if no Qualified Financing occurs
Term of Payment: repayment obligations if no conversion occurs
Prepayment restrictions: prepayment only allowed with consent of Majority Holders
Change of Control: treatment of Notes upon sale, merger, or similar events
Subordination: Notes subordinated to Senior Indebtedness (e.g., bank loans)
Documentation List:
Subscription Agreement
Convertible Promissory Notes
Investor Questionnaire
Rights of Majority Holders to amend or waive note provisions
Allocation of legal expenses
Editable Word format for flexible customization
Instructions for Completing the Template
Insert:
Company Name, State of Incorporation, and Entity Type at the beginning.
Specifics such as:
Interest Rate (e.g., 5%-8%)
Maximum Aggregate Note Amount (e.g., $1M or $2M)
Minimum Closing Amount for first raise (e.g., $250,000)
Discount Percentage (e.g., 20%)
Valuation Cap (e.g., $5M, $8M)
Qualified Financing Size (trigger amount, e.g., $1M)
Maturity Date (e.g., 12-24 months from first closing)
Change of Control valuation triggers
Customize whether the Notes automatically convert at Maturity or remain repayable.
Confirm the governing law (default language assumes Delaware, but can be customized).
Make sure investors understand this is non-binding — formal agreements will follow.
Important Reminder
This document is provided as a template to assist with outlining proposed convertible note financing terms.
It does not constitute legal advice. You should consult a qualified attorney to ensure the Convertible Note Term Sheet aligns with your fundraising strategy, securities compliance obligations, and anticipated deal structure before proceeding to definitive documents.
About This Document
This Convertible Note Term Sheet summarizes the key terms and conditions proposed for a financing arrangement where Investors provide a loan to a Company, which may later convert into equity during a future financing or liquidity event.
It provides a simple, non-binding outline of major deal points before full legal documents are drafted.
Who Should Use This Template
Startups preparing to raise seed or bridge funding via convertible notes
Investors looking for a summary of terms before committing to detailed negotiations
Companies and founders wanting to move quickly on early-stage financing
Legal teams creating a framework for definitive agreements like the Subscription Agreement and Convertible Promissory Note
What the Template Includes
Type of Security: Convertible Promissory Notes with a specified interest rate
Investment Amount: maximum issuance size and minimum commitment for initial closing
Investor Suitability: limited to accredited investors under Regulation D, Rule 506
Closing procedures and timing (Initial Closing and subsequent closings)
Terms of Conversion:
Mandatory conversion at the next Qualified Financing with a discount and/or valuation cap
Voluntary conversion at maturity into common stock if no Qualified Financing occurs
Term of Payment: repayment obligations if no conversion occurs
Prepayment restrictions: prepayment only allowed with consent of Majority Holders
Change of Control: treatment of Notes upon sale, merger, or similar events
Subordination: Notes subordinated to Senior Indebtedness (e.g., bank loans)
Documentation List:
Subscription Agreement
Convertible Promissory Notes
Investor Questionnaire
Rights of Majority Holders to amend or waive note provisions
Allocation of legal expenses
Editable Word format for flexible customization
Instructions for Completing the Template
Insert:
Company Name, State of Incorporation, and Entity Type at the beginning.
Specifics such as:
Interest Rate (e.g., 5%-8%)
Maximum Aggregate Note Amount (e.g., $1M or $2M)
Minimum Closing Amount for first raise (e.g., $250,000)
Discount Percentage (e.g., 20%)
Valuation Cap (e.g., $5M, $8M)
Qualified Financing Size (trigger amount, e.g., $1M)
Maturity Date (e.g., 12-24 months from first closing)
Change of Control valuation triggers
Customize whether the Notes automatically convert at Maturity or remain repayable.
Confirm the governing law (default language assumes Delaware, but can be customized).
Make sure investors understand this is non-binding — formal agreements will follow.
Important Reminder
This document is provided as a template to assist with outlining proposed convertible note financing terms.
It does not constitute legal advice. You should consult a qualified attorney to ensure the Convertible Note Term Sheet aligns with your fundraising strategy, securities compliance obligations, and anticipated deal structure before proceeding to definitive documents.
