Convertible Loan Term Sheet

Description
This is often used when first financing a company if they are having trouble agreeing on valuation. Also used as a bridge before a Series A or a larger seed round.

Advantages:
Postpones a discussion regarding valuation possibly implementing a 'rolling close.'
Opens a pathway from a pre-priced round to a round priced in the future: it's the link used to lengthen the runway and confirm an price rise.
Leads a fast deal close as it's a straightforward deal structure.
Investors are seen as lenders as opposed to shareholders which in turn may enable security rights protecting downside.
Enables a certain degree of flexibility.

Disadvantages
Can often increase pressure for investor returns.
Shareholders have no rights or ways of influencing.

*Originally shared on NACO Canada's website*