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.
- Open the options menu
- Click on "Convert into shares"
- 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.