# Convertible note

Concept · [Fundraising and equity](https://ecosystem.samcarlton.com/fundraising)

Also called: convertible debt, convertible, note, convertible loan

A [loan](https://ecosystem.samcarlton.com/small-business-loan) from an investor that is meant to turn into [shares](https://ecosystem.samcarlton.com/equity) later instead of being paid back in cash. Unlike a [SAFE](https://ecosystem.samcarlton.com/safe) it is debt, so it carries interest and has a date when it comes due.

**For example:** An investor lends a startup money through a convertible note. At the next [funding round](https://ecosystem.samcarlton.com/series-a), the amount owed plus interest [turns](https://ecosystem.samcarlton.com/turn) into [shares](https://ecosystem.samcarlton.com/equity).

## Connects to (4)

- [SAFE](https://ecosystem.samcarlton.com/safe): Simple agreement for future equity.
- [Valuation cap](https://ecosystem.samcarlton.com/valuation-cap): A term in a SAFE or convertible note that sets the highest valuation used to work out how many shares the investor gets when it converts.
- [Equity](https://ecosystem.samcarlton.com/equity): Ownership in a company.
- [Small business loan](https://ecosystem.samcarlton.com/small-business-loan): Money a business borrows and must repay with interest.

> This glossary is plain-language orientation, not legal or financial advice. Before you decide on a company structure, a contract, taxes or a fundraising deal, talk with a lawyer or an accountant.

Map view: https://ecosystem.samcarlton.com/convertible-note