Convertible note
In accounting, convertible note means debt that converts into stock at a future financing, usually at a discount or a cap, accruing interest until it does — a liability until conversion, with any embedded conversion feature assessed for separate accounting.
- Layer
- Lexicon
- Defined in
- Lexicon
- Nearby
- 4
Authority
This definition follows ASC 470-20; ASC 815-15.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Convertible noteA loan from an investor that converts into shares at your next priced round, usually with a valuation cap or a discount. Unlike a SAFE it's debt: it accrues interest and has a maturity date.
- How to account for SAFEs on your balance sheetA SAFE is cash today and shares later. Why it usually sits with liabilities, how the cap and discount set conversion, and what to book at the priced round.
- Chart of accounts for startups: a starting templateA starting chart of accounts for a US startup: number ranges, the expense accounts you need, and when to add an account versus a class or tracking tag.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- SAFE (not debt)
- equity
Nearby in the catalog
No component names this concept outright. These are the ones in its part of the system, which is a weaker claim — but a component nothing links to is a component nobody finds.
Terms this one depends on
Also in Equity & financing
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.