Vermont Angel Fund Promissory Note Term Sheet

• Category: Small Business - Investment or Funding
• State: Multi-State
• Control #: US-ENTREP-004-1
• Format: Word; Rich Text

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 Vermont Angel Fund Promissory Note Term Sheet serves as a comprehensive document outlining the agreement between the Vermont Angel Fund and an entrepreneur seeking financial support. It outlines the terms and conditions that both parties must adhere to during the investment process. This term sheet plays a crucial role in ensuring clarity and setting expectations for both the angel investors and entrepreneurs involved. The Vermont Angel Fund offers different types of Promissory Note Term Sheets to suit the unique needs and circumstances of various entrepreneurs. These term sheets may include: 1. Convertible Loan Agreement: This type of term sheet allows the entrepreneur to receive a loan from the Vermont Angel Fund, which can later be converted into equity in the company. It provides flexibility for both parties, as it offers the option to convert the loan into shares at a later date, usually at the next funding round or upon certain triggers, such as a sale or an initial public offering (IPO). 2. Revenue-Based Loan Agreement: In certain cases, the Vermont Angel Fund may offer a different type of Promissory Note Term Sheet known as the revenue-based loan agreement. This agreement enables the company to repay the loan based on a percentage of its revenue over a specific period. This approach serves as an alternative to traditional equity financing, as it aligns the repayment terms with the company's ongoing revenue generation. 3. Traditional Loan Agreement: While angel investors often prefer equity or convertible loan agreements, some situations call for a more traditional loan agreement. This type of Promissory Note Term Sheet resembles a standard loan agreement, where the entrepreneur receives a fixed amount of funds and agrees to repay the loan with interest over a predetermined period. The Vermont Angel Fund Promissory Note Term Sheet outlines key details, including the loan amount, interest rate, repayment terms, events triggering conversion (if applicable), and any additional terms or covenants. It provides clarity regarding the rights and obligations of both parties, ensuring a transparent and fair investment process. In conclusion, the Vermont Angel Fund Promissory Note Term Sheet is a crucial and customizable document that outlines the terms and conditions of the investment agreement between the angel investors and the entrepreneur. Whether in the form of a convertible loan agreement, revenue-based loan agreement, or traditional loan agreement, these term sheets help facilitate financing for Vermont-based startups and foster a supportive entrepreneurial ecosystem.