Convertible notes: how to create them and how they convert into equity

Convertible notes are a very widespread debt financing method where investors lend money to the company to eventually convert it into shares.

How to create a Convertible note on Capboard

Go to Ownership > Transactions > Add Transaction > Convertible note. A modal will open with some options:

  • Stakeholder: pick who will lend money to the company. If it's not an existing shareholder, you can create a new one.
  • Investment: amount of the loan.
  • Issue date: date when the loan was signed.
  • Maturity and discount: details of when ar at what conditions will the SAFE expire and/or be converted into equity. Convertible loans always have a maturity date that trigger either the conversion into equity or the loan payback.
    • Floor: Minimum valuation the convertible note will be converted for.
    • Cap: Maximum pre-money valuation the convertible note will be converted for. If Discount is also set, the loan will be converted for the lower of the two.
    • Discount: Rebate on the valuation the loan will be converted for. If Cap is also set, the loan will be converted for the lower of the two.
    • Maturity date: details of when ar at what conditions will the SAFE expire and/or be converted into equity.
  • Interest: in some countries convertible notes have an interest. If yours is one of them, you can set it up there. It's not common in the US, UK...
  • Documents: upload the convertible note contract so it's available to the stakeholder.

How to convert a Convertible note into shares

When a company wants to convert a SAFE into equity either because it has reached the maturity date or because there is a funding round happening, Capboard facilitates the calculations. To convert it, Go to Ownership > Transactions and find the Convertible note.

  1. Open the options menu
  2. Click on "Convert into shares"
  3. Upong opening it, the loan presets will appear, as well as the conversion details, which can be edited by you:
    • Date: day when the loan is being converted into shares.
    • Pre-money valuation: company the valuation the loan is converted at. If there is a Cap lower than the actual valuation, it will be the Cap.
    • Tax witholdings: amount to withhold from interest earned.
    • Number of shares: amount of shares the loan will be converted into.
    • Money to return: shares are indivisible, so they are rounded down in case of decimals, and the amount equivalent to the decimals is returned to the borrower.


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