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.