A convertible loan agreement is a type of debt agreement where the loan can be converted into equity once when gets future financing. This is often done in order to attract investors and get them to invest money and one does not even need to show the economic value of the organization. You can also mention the particular time or period when the conversion from debt to equity will occur and consider all possible scenarios and consequences of this conversion and what effect it will have on your business.
This type of agreement is mainly created by new companies where there is less reduction in the price of the stock when the securities are converted and because the initial loan amount can accumulate interest. Since the calculations can be complicated, it is better to hire a lawyer who will be able to explain to you how to make the most of this agreement and also clearly mention who the investors will be repaid.
Convertible Loan Agreement
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