Angel Investor Loans and Sample Promissory Notes

When a small company or start-up business needs funds, it often turns to "Angel Investors."  Angel investors are typically wealthy individuals who invest in early-stage companies.  Such individuals may invest by purchasing stock directly from the company, either themselves or via an entity (like a trust or LLC) that they control. Angel investors may also elect to invest in the company by making a loan, either secured or unsecured by the company’s assets. Sometimes these loans will have a “conversion” right to convert some or all of the loan amount into company stock and the documentation for such loans is typically in the form of a Convertible Promissory Note.

Whether the loan converts to stock or not, a Promissory Note is usually the primary legal document used to memorialize the obligation of the company to repay the loan from the angel investors.

You can learn more and view a sample Promissory Note by clicking this link.

Laws on this topic may vary from state to state. This content is not meant to provide you with complete information and it is not intended to be legal or tax advice. It is recommended that you consult with your own attorney, accountant or other advisor regarding your specific situation.