South Dakota 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.

South Dakota Angel Fund Promissory Note Term Sheet is a legal document that outlines the terms and conditions of a loan agreement between a venture capital firm or angel investor and a startup or small business based in South Dakota. This term sheet serves as a preliminary agreement and is used to establish the key terms of the funding arrangement before drafting the final promissory note. The South Dakota Angel Fund Promissory Note Term Sheet typically includes important details such as the loan amount, interest rate, repayment terms, maturity date, collateral requirements (if applicable), and any additional covenants or conditions that may apply. It sets the groundwork for the final promissory note, which will be a more comprehensive legal agreement incorporating the information mentioned in the term sheet. Key elements of a South Dakota Angel Fund Promissory Note Term Sheet may also include: 1. Conversion Rights: If the loan can be converted into equity at a later stage, the term sheet specifies the conversion terms such as the conversion price, conversion ratio, and any applicable discount or valuation cap. 2. Prepayment: The term sheet may outline whether prepayment of the loan is allowed and if any penalties or fees will be incurred for early repayment. 3. Default and Remedies: It may define the events that constitute default and the remedies available to the lender in case of default, such as acceleration of repayment or the right to seize collateral. 4. Investor Rights: The term sheet may mention certain rights or privileges granted to the investor, such as information rights, board representation, or participation rights in future funding rounds. While South Dakota Angel Fund Promissory Note Term Sheets generally follow a standard structure, it's worth noting that there can be variations or specific versions tailored to different types of loans or funding scenarios: 1. Convertible Note Term Sheet: If the loan is intended to convert into equity upon a triggering event, this term sheet will include the conversion terms and any other relevant provisions specific to convertible notes. 2. Simple Term Sheet: This version of the term sheet includes only the essential terms such as loan amount, interest rate, and repayment terms, generally used for straightforward loan agreements. 3. Secured Term Sheet: In cases where collateral is required as security for the loan, this term sheet will outline the details of the collateral, its valuation, and the procedures involved in securing and releasing it. South Dakota Angel Fund Promissory Note Term Sheets play a vital role in formalizing the initial agreement between investors and startups, providing a framework for negotiations, and ensuring both parties are aligned on the core terms before proceeding with the final promissory note.