# What is Convertible Note? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Funding  
> **Canonical Citation:** [https://spidits.com/startup-glossary/convertible-note](https://spidits.com/startup-glossary/convertible-note)

## Definition
A Convertible Note is a debt instrument that converts into equity at a future date, typically in connection with a priced funding round.

## Architectural Mechanics & Deep Dive
A Convertible Note is a debt instrument that converts into equity at a future date, typically in connection with a future priced equity round. Unlike SAFE notes, convertible notes are structured as loans, meaning they carry an interest rate (usually 4% to 8%) and a maturity date (usually 18 to 24 months). If the startup does not raise a priced round before the maturity date, the note may become repayable or convert to equity under predefined terms. They typically include valuation caps and discount rates to incentivize early investors.

## Industry Applications & Real-World Use Cases
Bridge rounds and early seed-stage financing

## Frequently Asked Questions

### What is the difference between a SAFE note and a convertible note?
A SAFE note is a simple contract for future equity that does not carry interest or maturity dates. A convertible note is structured as debt, meaning it accumulates interest over time and must convert or be repaid by a set maturity date.

### Do convertible notes have maturity dates?
Yes. They are structured as debt, meaning they carry an interest rate and must convert or be repaid by a maturity date (usually 18-24 months).

## Related Terminology
- [safe-note](https://spidits.com/startup-glossary/safe-note)
- [valuation-cap](https://spidits.com/startup-glossary/valuation-cap)
- [term-sheet](https://spidits.com/startup-glossary/term-sheet)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*