Thank you! First video that explained that the investor has the option of receiving shares OR having the loan paid back. Quick question: Does the note have an interest coupon that gets paid out annually or quarterly throughout the life of the note OR would the interest be paid back to the investor at the maturity date... I'm sure it depends on the contract language of the coupon. Thanks for your time!
Yep, you got it! Depends on the language of the contract. Interest can accrue immediately, or upon the maturation date, or not at all (rare). In today's high(er) interest rate environment, you're likely to see more convertible notes that demand higher rates of interest rate earlier during the loan term. Contact us at www.parrbusinesslaw.com/contact for more information!
Can business owners take some of the money from the convertible notes to pay themselves since they're giving up equity in their company or does it all have to go towards business expenses/operations?
Great question - depends on the terms of the note. In general, the note is NOT going to impose restrictions on use of funds, but the investor may seek to control the use of the funds through other mechanisms (e.g. a board seat). If investor is granted a board seat, then his/her consent would be required to issue dividends or approve salaries to shareholders / executives of the Company. Contact us at www.parrbusinesslaw.com/contact for more information!
Did this answer all of your questions? If you'd like to know more about Convertible Notes - please feel free to get in touch!
How do you figure out the interest rate and date of maturity?
This is helpful! Thank you!
That was a great direct explanation
the best simpliest explanation!!!!! loved
Glad it was helpful!
Great video! Very informative and super easy to understand. Thanks Steve!
Glad it was helpful!
Well said
Thank you! First video that explained that the investor has the option of receiving shares OR having the loan paid back. Quick question: Does the note have an interest coupon that gets paid out annually or quarterly throughout the life of the note OR would the interest be paid back to the investor at the maturity date... I'm sure it depends on the contract language of the coupon. Thanks for your time!
Yep, you got it! Depends on the language of the contract. Interest can accrue immediately, or upon the maturation date, or not at all (rare). In today's high(er) interest rate environment, you're likely to see more convertible notes that demand higher rates of interest rate earlier during the loan term.
Contact us at www.parrbusinesslaw.com/contact for more information!
Steve pl explain the cap table math also . nice video.
Stay tuned for a follow up video where we break it all down!
Can business owners take some of the money from the convertible notes to pay themselves since they're giving up equity in their company or does it all have to go towards business expenses/operations?
Isn't paying yourself a business cost? I mean, how can you work on a product if you are hungry and have no place to live?
Great question - depends on the terms of the note. In general, the note is NOT going to impose restrictions on use of funds, but the investor may seek to control the use of the funds through other mechanisms (e.g. a board seat). If investor is granted a board seat, then his/her consent would be required to issue dividends or approve salaries to shareholders / executives of the Company.
Contact us at www.parrbusinesslaw.com/contact for more information!
about short time loan how short it is ? 5 years ?
Convertible Notes vary widely in terms of how long the loan term is. Typical range is 12 months to 3 years.