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Enter the full legal name of this party exactly as it appears on their ID or business registration.
Enter the full legal name of this party exactly as it appears on their ID or business registration.
A Convertible Promissory Note is the most common early-stage startup financing instrument — a short-term debt obligation that automatically converts into equity (preferred stock) at the next qualified financing round, typically at a discounted price or subject to a valuation cap. Unlike pricing a full equity round (which requires a company valuation), a convertible note defers the valuation question to a future priced round. Key economic terms: principal amount, interest rate, maturity date, conversion discount (typically 15–25%), valuation cap, and qualified financing threshold. IMPORTANT: securities law compliance is required — most convertible notes are issued under the exemptions in SEC Rule 506(b) or 506(c). Fill out this free convertible promissory note template online, e-sign it digitally, and download a legally valid PDF. no account or lawyer needed. Sections: Parties, Note Terms.
IMPORTANT: This Note involves an investment in securities. The Note has not been registered under the Securities Act of 1933. It is being sold in reliance on an exemption from registration. Investors must be accredited investors or otherwise qualify under applicable exemptions. Consult legal counsel before executing.
Principal Amount: $0.00 Issue Date: ______________ Maturity Date: ______________ Issuer: ______________ Investor: ______________
FOR VALUE RECEIVED, ______________, a company located at ______________ (the "Company"), promises to pay to ______________, located at ______________ (the "Holder"), or its registered assigns, the principal sum of $0.00 (the "Principal"), together with accrued but unpaid interest thereon at the rate of 6% per annum (simple interest), computed on the basis of a 365-day year, unless earlier converted as provided herein.
Unless earlier converted or repaid, all outstanding Principal and accrued interest shall be due and payable on demand by the Holder on ______________ (the "Maturity Date"). At the Holder's election, amounts due at Maturity may be converted into equity of the Company at the cap price as defined in Section 3.
Upon the closing of a Qualified Financing (defined as the next sale of preferred stock of the Company in a single transaction or series of related transactions resulting in aggregate proceeds to the Company of at least $1,000,000.00), all outstanding Principal and accrued interest under this Note shall automatically convert into shares of the preferred stock issued in such Qualified Financing. The conversion price shall be the lower of: (a) the price per share paid by investors in the Qualified Financing multiplied by (1 minus the Conversion Discount of 20%); or (b) the price per share calculated by dividing the Valuation Cap of $5,000,000.00 (pre-money) by the fully-diluted capitalization of the Company immediately before the Qualified Financing.
Conversion Discount: 20% Valuation Cap: $5,000,000.00 (pre-money) The conversion discount and valuation cap reflect a negotiated benefit to the Holder for the risk assumed in providing early-stage financing.
The following constitute Events of Default: (a) failure to pay Principal and interest at Maturity; (b) the Company's filing of a bankruptcy petition; (c) any material breach of this Note that remains uncured for 30 days after written notice. Upon an Event of Default, the Holder may declare all outstanding Principal and accrued interest immediately due and payable.
This Note does not entitle the Holder to any voting rights or other rights of a stockholder of the Company until conversion.
This Agreement shall be governed by and construed in accordance with the laws of the State of ______________, without regard to its conflict-of-laws principles.