Convertible Note Term Sheet
A Convertible Note Term Sheet establishes the general terms of an investor joining your business on a convertible loan basis.
Last updated January 14, 2025
Suitable for Australia
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Frequently asked questions
Use this Convertible Note Term Sheet if:
- You are preparing for Seed Round investment and would like to set out the negotiated and key terms to an investor to join your business;
- You are doing so under a convertible loan arrangement.
What does this Convertible Note Term Sheet cover?
Convertible notes are particularly good for investing in companies without value. As the share prices rise, so does the amount the investor gains. However, as it is a new company there is a significant amount of risk born by the investor. Hence, the features of the note look to compensate for that risk. These features include:
- The discount rate: a promise that when this conversion occurs, the investor will receive their shares at a lower price.
- The valuation cap: a restriction on the price the investor will pay per share.
- The interest rate: unlike SAFE notes, convertible notes will accrue interest. However, this interest also becomes equity at conversion.
- Additional optional conditions relating to inclusion and sustainability.
Further information
View Sample Convertible Note Term Sheet
The Legal Risk Score of a Convertible Note Term Sheet Template is Medium
Our legal team have marked this document as medium risk considering:
- It is one component of a complex transaction.
- The document provides for exclusive negotiation during a period of time.
- It is not legally binding.
Articles about Convertible Note Term Sheet
What is a Convertible Note?
A convertible note can be a way for businesses to raise the money they need without enduring the delays of alternative routes. This article explains why.
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Convertible Notes: Advantages and Disadvantages
Convertible notes are a common way early stage startups can raise funding. Read about the advantages and disadvantages of using them here.
SAFE or Convertible Note? What You Need to Know
SAFE and convertible notes offer great opportunities for new businesses to raise capital from investors early on. Here's our guide to how they work.
What is a Term Sheet? (2025 Update)
What is a Term Sheet and how can it help your business? Although not legally binding, term sheets have many benefits. Find out here.
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