A legal documentation that binds the terms and conditions for a convertible loan is termed as a convertible loan agreement. A convertible loan is the simplest loan that states that the borrowed money has to be returned back with interest in a predefined time. The difference of convertible loan from other types of loans is that this loan provides the debtor with a conversion feature which provides the lender with a facility to transfer all or a part of the principal loan amount into some equity position or a preferred stock within a specified timeframe and at a specified conversion rate.
In some cases the borrower is provided with some combination of concessions like no prepayment penalties, a lower rate of interest, and no closing costs on the deal or a payment vacation sometimes etc but that is totally at the lender and borrower’s mutual choice. The agreement is legalized by notarizing the entire document under the supervision of a legal authority in a notary public.
Convertible Loan Agreement
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