Can a note be signed electronically?

Yes. Electronic signatures are enforceable under the federal ESIGN Act (15 U.S.C. ch. 96) and state UETA statutes where adopted; ensure intent, consent, attribution, and record retention to meet the ESIGN legal validity test.

Do I need a notary or witnesses?

Generally no for an unsecured convertible note, but notarization or witnesses may be required if the note is secured, if local law or lender policy requires it, or for perfection of certain collateral interests.

Should I file a UCC‑1 financing statement?

If the note is secured by collateral, file a UCC‑1 to perfect the lien and preserve priority against other creditors; consult counsel for jurisdictional timing and drafting.

What happens if a party signs with a wrong entity name?

A mismatched entity name can impair enforceability and complicate UCC perfection; correct via amendment or restated note and, if required, refile financing statements.

Are conversion mechanics taxable events?

Conversion can have tax consequences depending on structure; consult a tax advisor. Maintain records to support treatment for IRS purposes and to avoid reporting penalties (see IRC provisions on information returns).

How do I revoke or cancel a note?

Cancellation typically requires written agreement of all parties, satisfaction or payment, and filing a UCC termination statement where a financing statement was recorded.

Electronic Signature
Templates
Finance
Convertible Loan Promissory Note

Convertible Loan Promissory Note

This template is fully customizable. Edit the text, fill out the fields, and send it for signature. Give it a try!

Convertible Loan Promissory Note

Parties

Lender Name:

Lender Address

Borrower Name:

Borrower Address

Principal, Interest, and Origination

Principal Amount: $ Origination Date:

Interest Rate (per annum) Maturity Date

Payment and Prepayment

Interest Accrual and Payment: Interest shall accrue on the unpaid principal at the Interest Rate and shall be payable unless converted pursuant to Section Conversion.

Prepayment

Prepayment permitted: Yes If prepayment is permitted, prepayment fee: $

Conversion Terms

Security upon conversion: Upon conversion the principal and accrued interest shall convert into the Company's shares, subject to adjustment as set forth below.

Automatic Conversion on Qualified Financing

Threshold for Qualified Financing: $. Upon a Qualified Financing, the outstanding principal and accrued interest shall automatically convert into the securities issued in such financing at a conversion price equal to the lesser of (a) the price per share paid by investors in the Qualified Financing, and (b) the Discounted Price equal to the price per share reflecting a discount to the Qualified Financing price, subject to the Valuation Cap set forth below.

Valuation Cap (if applicable) Optional Conversion at Maturity

If no Qualified Financing has occurred prior to Maturity, at Borrower's or Lender's election the outstanding principal and accrued interest may convert into equity at a conversion price equal to $ per share or on such other terms as the parties shall mutually agree in writing.

Anti-dilution and Adjustments

Default; Remedies

Events of Default include: (i) non-payment of principal or interest within days after written notice, (ii) insolvency or liquidation of Borrower, (iii) breach of material representations or covenants, and (iv) any material adverse change affecting Borrower's ability to perform. Upon Event of Default, Lender may declare the entire unpaid principal and accrued interest immediately due and payable and exercise all rights available at law or in equity.

Default Interest and Fees

Security

Secured: Yes Unsecured: Yes

If secured, describe collateral

Notices

Lender Notice Address Borrower Notice Address

Representations, Warranties and Covenants

Miscellaneous

Governing Law: The laws of govern this Note. This Note constitutes the entire agreement of the parties with respect to its subject matter and may be amended only by a written instrument signed by both parties.

Additional Terms and Conditions

Acknowledgment

Each party acknowledges that it has read and understands the terms of this Convertible Loan Promissory Note, has the power and authority to enter into this agreement, and that the persons signing below are duly authorized to bind the respective parties.

Lender (Print Name):

By:

Date:

Borrower (Print Name):

By:

Date:

What a Convertible Loan Promissory Note Is

A Convertible Loan Promissory Note is a written promise by a borrower to repay a loan that can convert into equity under agreed terms. It sets the principal, interest rate, maturity, conversion events, conversion price or discount, and default remedies. Used frequently in early-stage financings, it documents creditor rights and conversion mechanics while preserving speed and flexibility compared with an immediate equity round. Properly drafted notes clarify investor rights, repayment schedule, and interactions with security filings and applicable state law.

Why this document matters for founders and investors

A clear Convertible Loan Promissory Note captures loan economics and conversion mechanics so both parties share expectations on maturity, conversion triggers, valuation cap, discount rate, and default remedies.

Typical users and signing parties

Several parties commonly prepare, review, or sign convertible notes depending on role and transaction complexity.

Founders and executives negotiating seed-stage financing and setting conversion terms.
Angel investors or venture funds providing bridge capital with conversion options.
Corporate counsel and outside attorneys who draft and review conversion language.

Role clarity helps limit post-closing disputes and ensures the note aligns with subsequent equity documents.

Essential parts of a professional note

A well-structured note includes discrete sections for monetary terms, conversion, events of default, and administrative procedures to reduce ambiguity and ease conversion.

Principal

Specifies the exact loan amount and currency, including any tranches, advances, and how additional advances are documented to avoid misunderstandings during conversion.

Interest

States interest rate, accrual method, compounding, payment timing, and whether unpaid interest converts into equity at conversion or is paid in cash at maturity.

Maturity

Identifies the maturity date and the borrower’s obligations if conversion does not occur, including repayment schedules, extension options, and default interest.

Conversion Terms

Defines triggers (qualified financing, change of control, maturity), conversion price formula, valuation cap, discount, and treatment of partial conversions.

Security / UCC

Specifies whether the note is secured; if secured, describes collateral and advises on UCC-1 financing statement filing to protect lender’s priority.

Defaults & Remedies

Lists events of default, cure periods, lender remedies, acceleration clauses, and any waiver mechanics to govern enforcement and investor protections.

Core compliance and security attributes

ESIGN / UETA: Accepts e-signatures under ESIGN/UETA

HIPAA Considerations: Avoid PHI in note content

Audit Trail: Timestamped signing records

Encryption: TLS in transit

Data at Rest: AES-256 encryption

Retention: Preserve reproductions

Step-by-step: completing and executing the note

Follow a consistent sequence from drafting through signature to reduce errors and support enforceability.

01

Draft: Prepare terms and verify party details.
02

Review: Have counsel confirm conversion formula and remedies.
03

Sign: Execute with authorized signatories.
04

Record: File UCC‑1 if security attaches.

Configuring a digital signing workflow

Set up fields and authentication to match legal requirements and transaction complexity before sending the note for signature.

Field	Configuration
Signature Type	E-signature with timestamp and initials fields
Authentication	Email plus optional SMS or knowledge-based auth
Conditional Fields	Show conversion fields only if conversion selected
Template	Save as template for reuse on similar financings

Where to send and how the document flows

Understanding delivery paths and final recipients prevents delays and ensures all parties receive executed copies.

Primary Recipient: Investor or Lender email address
Counterparty: Borrower signatory on file
Counsel copy: Send to each party’s counsel
Records: Repository for executed PDF

Digital signing and e-submission considerations

Select an eSignature platform that supports audit trails, appropriate authentication, and required compliance addenda when handling investment documents.

Authentication: Email, SMS codes
Audit Trail: IP and timestamps
File Formats: PDF and DOCX supported

Ensure the chosen platform can provide reproducible records, signatory attribution, and any needed Business Associate Agreement for PHI; keep original signed PDFs in a secure document repository.

Key dates to track in the note lifecycle

Track conversion windows, maturity, notice periods, and any optional extension or cure deadlines to manage obligations and investor rights.

Issue Date:

Date loan funds are delivered and note becomes effective

Maturity Date:

Final repayment date if no conversion occurs

Conversion Notice Deadline:

Timeframe for delivering conversion election notices

Cure Periods:

Length to remedy defaults before acceleration

UCC Filing Window:

File promptly after security grant to perfect lien

Typical processing milestones from signing to conversion

A milestone timeline clarifies responsibilities and expected actions from execution through conversion or repayment.

01

Execution

Document signed by authorized representatives

02

Funding

Lender transfers loan proceeds to borrower

03

Perfection

Record UCC‑1 or other security filings if applicable

04

Conversion Event

Trigger occurs and conversion mechanics are implemented

Common pitfalls to avoid when preparing the note

Vague conversion formulas that omit rounding or tie‑breaking rules, which can lead to investor disputes and inconsistent equity issuance.
Mismatched party names or incorrect entity types that complicate enforcement and perfection of security interests under UCC rules.
Failing to specify notice methods and addresses, causing missed conversion elections or missed cure opportunities under the agreement.
Neglecting UCC‑1 filings when collateral exists, risking loss of priority against subsequent secured creditors or purchasers.

Consequences of errors or omissions

Tax Reporting: Potential IRC §6721 penalties

Loss of Priority: Unperfected lien risk

Conversion Disputes: Equity dilution litigation

Enforcement Costs: Attorney fees and court costs

Default Interest: Higher interest on acceleration

Statute Limits: Claims barred by limitations

eSignature vendor comparison for signing convertible notes

Compare starting prices and key capabilities; signNow is listed first. Confirm plan details and enterprise features with each vendor before procurement.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day trial	Varies	Varies	Varies	Varies
Bulk Send	Yes	Yes	Yes	Yes	No
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No cap	100 envelopes/user/year	Varies	Varies	Varies

Frequently asked questions and answers

Practical answers to common execution, enforceability, and eSignature questions for convertible notes.

Need help? Contact support

Can a note be signed electronically?
Yes. Electronic signatures are enforceable under the federal ESIGN Act (15 U.S.C. ch. 96) and state UETA statutes where adopted; ensure intent, consent, attribution, and record retention to meet the ESIGN legal validity test.
Do I need a notary or witnesses?
Generally no for an unsecured convertible note, but notarization or witnesses may be required if the note is secured, if local law or lender policy requires it, or for perfection of certain collateral interests.
Should I file a UCC‑1 financing statement?
If the note is secured by collateral, file a UCC‑1 to perfect the lien and preserve priority against other creditors; consult counsel for jurisdictional timing and drafting.
What happens if a party signs with a wrong entity name?
A mismatched entity name can impair enforceability and complicate UCC perfection; correct via amendment or restated note and, if required, refile financing statements.
Are conversion mechanics taxable events?
Conversion can have tax consequences depending on structure; consult a tax advisor. Maintain records to support treatment for IRS purposes and to avoid reporting penalties (see IRC provisions on information returns).
How do I revoke or cancel a note?
Cancellation typically requires written agreement of all parties, satisfaction or payment, and filing a UCC termination statement where a financing statement was recorded.

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