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Virginia Angel Fund Promissory Note Term Sheet

Category:
Small Business - Investment or Funding
State:
Multi-State
Control #:
US-ENTREP-004-2
Format:
Word; 
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Description

"An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. New start-up companies often turn to the private equity market for seed money because the formal equity market is reluctant to fund risky undertakings. In addition to their willingness to invest in a start-up, angel investors may bring other assets to the partnership. They are often a source of encouragement; they may be mentors in how best to guide a new business through the start-up phase and they are often willing to do this while staying out of the day-to-day management of the business.
Term sheet is a non-binding agreement setting forth the basic terms and conditions under which an investment will be made."

The Virginia Angel Fund Promissory Note Term Sheet is a legally binding document that outlines the terms and conditions associated with a loan agreement between an angel investor and an entrepreneur based in Virginia. This term sheet serves as a framework for the more detailed promissory note that will be created upon the agreement of both parties. Keywords: Virginia Angel Fund, promissory note, term sheet, loan agreement, angel investor, entrepreneur The Virginia Angel Fund Promissory Note Term Sheet usually includes the following essential elements: 1. Loan Amount: Specifies the total amount of money the angel investor agrees to lend to the entrepreneur. 2. Interest Rate: Determines the percentage of interest charged on the loan amount throughout its term. It highlights whether the interest will be fixed or variable. 3. Repayment Terms: Outlines the repayment schedule, including the frequency (monthly, quarterly, annually) and duration of payments. It may also detail any initial grace period before repayments begin. 4. Security/Collateral: Addresses whether collateral (such as assets or personal guarantees) is required to secure the loan. This ensures the investor's protection in case of default. 5. Subordination: Determines if the loan will be subordinated to other debt, meaning it will be repaid only after the repayment of prior debt. This clause protects the angel investor's interests in the case of bankruptcy or insolvency. 6. Prepayment: States the conditions and penalties (if any) for early repayment of the loan. This clause is crucial if the entrepreneur plans to repay the loan before the agreed-upon term. 7. Conversion: Specifies whether the angel investor has the option to convert the loan into equity in the entrepreneur's business at a later stage, usually during a subsequent investment round. Different types of Virginia Angel Fund Promissory Note Term Sheet may exist based on variations in the terms mentioned above: 1. Convertible Promissory Note Term Sheet: This term sheet provides an option for the angel investor to convert the loan into equity in the future, usually during a specific financing event. 2. Secured Promissory Note Term Sheet: In this case, the term sheet includes details regarding collateral or security required by the angel investor to safeguard their investment. 3. Subordinated Promissory Note Term Sheet: This type of term sheet outlines that the loan will be repaid only after the repayment of other, higher-priority debts. It provides additional security for the angel investor. In conclusion, the Virginia Angel Fund Promissory Note Term Sheet acts as a crucial starting point for finalizing a loan agreement between an angel investor and an entrepreneur. It covers crucial aspects such as loan amount, interest rate, repayment terms, collateral, subordination, prepayment provisions, and potential conversion options. The various types of term sheets cater to the specific requirements and preferences of both the investor and the entrepreneur.

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FAQ

What Is an Angel Investor? Angel investors are wealthy private investors focused on financing small business ventures in exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their own net worth.

Angel investors typically want to receive 20 to 25 percent of your profit. However, the amount you pay your angel investors depends on your initial contract. Hammer out these details before they give you any money, and have a lawyer draw up the agreement.

An angel investor is a wealthy person who invests his or her own money in a company?usually a start-up?that is in the early stages of development. Angel investors expect to take ownership positions in the companies they support because their capital is unsecured?they have no claim on the company's assets.

Angel investing is high risk. While there is always the potential for high returns, angel investing is a high-risk endeavor. Startups are often unproven and have a high failure rate. As such, investors could lose all or most of their investment.

Angel investors are wealthy private investors focused on financing small business ventures in exchange for equity. Unlike a venture capital firm that uses an investment fund, angels use their own net worth.

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