District of Columbia 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 District of Columbia Angel Fund Promissory Note Term Sheet is a crucial document that defines the terms and conditions associated with funding a start-up or early-stage venture in the District of Columbia. This term sheet serves as a binding agreement between the angel investor and the entrepreneur, outlining the key provisions and expectations of both parties involved. The District of Columbia Angel Fund Promissory Note Term Sheet includes various essential elements such as loan amount, interest rate, repayment terms, and default provisions. It is important to note that there might be different types of promissory note term sheets available, and each may cater to specific funding requirements and scenarios. Let's explore some of them: 1. Convertible Promissory Note: — This type of term sheet offers the option to convert the loan into equity shares in the future, typically during a designated financing round. — The conversion rate and terms are outlined to ensure fairness and transparency. 2. Secured Promissory Note: — This agreement involves securing the loan with assets or collateral, providing the investor with a guarantee if the borrower fails to repay the debt as agreed. — The assets used as collateral might include real estate, personal property, or any other valuable asset acceptable to both parties. 3. Unsecured Promissory Note: — Unlike the secured promissory note, this type does not require any collateral or assets as a guarantee. — Usually, unsecured loans come with higher interest rates to compensate for the increased risk undertaken by the investor. 4. Senior Promissory Note: — This term sheet grants priority status to the investor regarding repayment in case of default or liquidation of the venture. — Senior debt is paid first before other claims, providing the investor with a higher chance of recovering their funds. 5. Subordinated Promissory Note: — In contrast to the senior promissory note, this type of term sheet holds a lower priority in the repayment hierarchy. — The investor, in this case, accepts a subordinate position to other creditors or stakeholders in the event of default or liquidation. The selection of the specific District of Columbia Angel Fund Promissory Note Term Sheet primarily depends on the investor's risk appetite, the entrepreneur's funding needs, and their mutual agreement. It is advisable to seek legal counsel and ensure a thorough understanding of the chosen term sheet's implications before entering into such an agreement.