{"ok":true,"canonical_url":"https://dealroom.so/glossary/convertible-note","api_url":"https://dealroom.so/api/public/glossary/convertible-note","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"convertible-note","term":"Convertible Note","group":"Your money in the deal","definition":"A type of short-term debt that converts into equity at a later date, usually during a future funding round or acquisition.","what_it_means":"While more common in startups, if the business you're buying has outstanding convertible notes, understand how they will be handled in the acquisition. They typically convert into equity based on specific triggers and valuations. As a buyer, you need to know if these will become equity and dilute your ownership, or if they must be repaid at closing.","url":"https://dealroom.so/glossary/convertible-note","official_sources":[],"related":[{"slug":"warrant","term":"Warrant","url":"https://dealroom.so/glossary/warrant"},{"slug":"subordinated-debt","term":"Subordinated Debt","url":"https://dealroom.so/glossary/subordinated-debt"},{"slug":"equity-injection","term":"Equity injection","url":"https://dealroom.so/glossary/equity-injection"},{"slug":"disguised-debt","term":"Disguised debt","url":"https://dealroom.so/glossary/disguised-debt"}],"related_questions":[{"question":"When does a convertible note held by an investor trigger affiliation for size standards?","url":"https://dealroom.so/for-lenders/questions/when-does-a-convertible-note-held-by-an-investor-trigger-affiliation-for-size-standards"},{"question":"Besides cash and seller notes, what other buyer contributions qualify for equity?","url":"https://dealroom.so/sba-7a/questions/besides-cash-and-seller-notes-what-other-buyer-contributions-qualify-for-equity"},{"question":"What is the required duration of a full standby seller note?","url":"https://dealroom.so/sba-7a/questions/what-is-the-required-duration-of-a-full-standby-seller-note"},{"question":"Can a full standby seller note accrue interest during the standby period?","url":"https://dealroom.so/for-lenders/questions/can-a-full-standby-seller-note-accrue-interest-during-the-standby-period"},{"question":"Is a seller's personal guaranty required for providing a standby note?","url":"https://dealroom.so/sba-7a/questions/is-a-seller-s-personal-guaranty-required-for-providing-a-standby-note"},{"question":"Can a standby seller note accrue or pay interest during the loan?","url":"https://dealroom.so/sba-7a/questions/can-a-standby-seller-note-accrue-or-pay-interest-during-the-loan"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Convertible Note","url":"https://dealroom.so/glossary/convertible-note","source_type":"DealRoom Data"}}