Montana Term Sheet — Convertible Debt Financing is a legal document that outlines the terms and conditions of a financing agreement between a company and an investor. It represents a form of funding where the investor provides a loan to the company that can be later converted into equity. Convertible debt financing is a popular method for startups and early-stage companies to secure funding while avoiding the need for valuation negotiations. It offers flexibility to both parties involved and can be a beneficial option for both investors and the company seeking funds. Here are some key aspects typically found in a Montana Term Sheet — Convertible Debt Financing: 1. Principal Amount: This refers to the initial loan amount provided by the investor to the company. 2. Interest Rate: The interest rate specifies the rate at which the loan will accrue interest over time. It is usually lower than traditional bank loans to make it more attractive for the company. 3. Maturity Date: The maturity date indicates the final date on which the convertible debt must be either repaid or converted into equity. It provides a timeline for both parties to plan their financial strategies accordingly. 4. Conversion Terms: This section defines the terms and conditions under which the loan can be converted into equity. It typically includes details such as the conversion price, discount rate, and valuation cap. 5. Conversion Price: The conversion price determines the price per share at which the debt will convert into equity. It is often set at a discounted rate compared to the price offered in future funding rounds. 6. Discount Rate: The discount rate is a percentage reduction applied to the conversion price, providing the investor with a lower cost per share compared to future investors. 7. Valuation Cap: A valuation cap is the maximum valuation at which the convertible debt can convert into equity, ensuring that early investors receive a fair return on their investment. 8. Repayment Terms: In case the debt is not converted into equity, this section outlines the repayment terms, including any scheduled payments, interest calculations, and penalties for late payments. Different types of Montana Term Sheet — Convertible Debt Financing can include variations in the conversion terms, repayment terms, and additional clauses tailored to meet the specific needs of both the investor and the company. It is important for both parties to carefully review and negotiate these terms to achieve a mutually beneficial agreement. By securing Montana Term Sheet — Convertible Debt Financing, companies can access necessary capital to fund their growth and development, while investors have the potential to earn a return on investment through future equity ownership.