A convertible loan term has been mentioned frequently in the DSIF investment procedure. Therefore, we would like to provide a definition of it, for introducing clarity among our young entrepreneurs. When a student startup obtains investment from DSIF, DSIF as an investor will provide a short-term convertible loan indicating maturity date, interest and the right to convert a loan into an equity stake of this company in the long-run future. The main advantage for entrepreneurs, that a convertible loan before being transformed into equity, has the same characteristics as a standard loan. But be attentive, the main inconvenience, the investor has a priority right at maturity date to claim all kinds of assets of the startup (tangible and intangible) for recovering the loan and interest. A convertible note is a type of convertible debt instrument that’s used to fund early and seed-stage startups. The investor loans money to a startup, and the convertible note “converts” the loan (principal plus interest) into equity that is repaid at the maturity date.
