Calculate convertible note conversion including accrued interest. Converts principal + interest at the lesser of cap or discount price.
Convertible Note Parameters
Enter your convertible note terms (principal, interest, maturity) and the next round details to compute conversion amount, price, shares, and ownership.
Understanding the Inputs (Convertible Note–Specific)
Key terms used in convertible note conversion
Principal, Interest & Maturity
The note principal is the amount loaned. Convertible notes typically accrue interest (e.g. 5–8% per year) until conversion. Months until conversion determine accrued interest. This calculator uses simple interest: Interest = Principal × Rate × (Months / 12).
Conversion amount = Principal + Accrued interest
Interest accrues until qualifying equity round
Valuation Cap & Discount
The valuation cap sets a maximum company valuation for conversion (same idea as in SAFEs). The discount gives a percentage off the next round’s price. Conversion price is the lower of cap-derived price and discount-derived price. Round price and pre-money fully diluted shares define the round.
A convertible note is a short-term debt instrument that converts into equity (usually preferred stock) at a qualifying financing round. Unlike a SAFE, it accrues interest until conversion. The conversion amount is principal + accrued interest. The conversion price is determined by the "lesser of" the valuation cap and the discount, same as with SAFEs.
Debt Until Conversion
Until conversion, the note is debt on the company’s books. Interest accrues (typically simple or compound). At a qualifying round, the note converts into equity at the conversion price; no cash repayment is required if the document specifies conversion.
Interest Accrual
Notes typically specify an annual interest rate (e.g. 5–8%). Interest accrues until the qualifying round (or maturity). This calculator uses simple interest: Accrued interest = Principal × (Rate / 100) × (Months / 12). Some documents use compound interest or payment-in-kind (PIK); check your note terms.
Simple vs Compound
Simple interest is applied to the principal only. Compound interest would apply to principal + accrued interest over time. This calculator uses simple interest for transparency; adjust the conversion amount manually if your note uses compound or PIK.
Valuation Cap and Discount
The valuation cap sets a maximum company valuation for conversion. The discount gives a percentage off the next round’s price. The conversion price is the lower of the cap-derived price and the discount-derived price. Shares issued = (Principal + Accrued interest) ÷ Conversion price.
Convertible notes are debt and accrue interest; SAFEs are not debt and do not accrue interest. Both use cap and discount to set the conversion price. Use the SAFE Note Conversion Calculator for SAFEs (no interest) and this calculator for notes (principal + interest).
Conclusion
This calculator gives you the conversion amount (principal + interest), conversion price, shares issued, and approximate ownership for a single convertible note. For multiple notes and a full cap table, use an equity cap table tool and model all instruments together.
Frequently Asked Questions
Common questions about convertible note conversion
Do convertible notes accrue interest?
Yes. Unlike SAFEs, convertible notes typically accrue interest (e.g. 5–8% per year) until conversion. The amount that converts is principal + accrued interest. This calculator uses simple interest; your note may specify compound or PIK.
How is the conversion price determined?
The conversion price is the lower of (1) cap price = Valuation Cap ÷ Pre-money fully diluted shares, and (2) discount price = Round price × (1 − Discount %). This gives the note holder the better rate.
What if the note matures before a qualifying round?
Many notes have a maturity date. If no qualifying round occurs by then, the document may allow repayment (principal + interest), extension, or conversion at a default valuation. Terms vary; check your note.
How is this different from the SAFE calculator?
The SAFE Note Conversion Calculator assumes no interest (principal only). The Convertible Note Conversion Calculator adds accrued interest to the principal before dividing by the conversion price. Both use the same cap and discount logic for the conversion price.
What is simple vs compound interest on a note?
Simple interest is calculated on the principal only (Principal × Rate × Time). Compound interest is calculated on principal plus previously accrued interest. This calculator uses simple interest; check your note for compound or PIK terms.
How do multiple convertible notes convert?
Notes typically convert in a defined order (e.g. by date). Each conversion increases total shares, which can affect effective price for later notes. Model all notes and the new round in a full cap table for accurate ownership.
Why is my ownership % only approximate?
This calculator divides note shares by (pre-money shares + note shares). It does not include new round investment shares or the option pool. For exact post-round ownership, use a full cap table that includes the new round and all instruments.
Can the company repay the note instead of converting?
Some notes allow the company to repay principal plus accrued interest at maturity instead of converting. Conversion is usually mandatory upon a qualifying round. Check your note for repayment and conversion triggers.
What interest rate is typical for convertible notes?
Rates of 5% to 8% per year are common. The rate compensates the investor for the time and risk until conversion. Higher-risk or longer-dated notes may have higher rates.
How does a convertible note differ from a SAFE?
A convertible note is debt and accrues interest; the conversion amount is principal + interest. A SAFE is not debt and does not accrue interest; conversion is on principal only. Both use valuation cap and discount to set the conversion price.
Usage of this Calculator
Practical applications and real-world context
Who Should Use This Calculator?
FoundersTo see how a single note (principal + interest) converts and affects ownership before signing or at a planned round.
Angel Investors / LendersTo estimate accrued interest, conversion amount, conversion price, shares, and ownership from note terms.
Startup Advisors & LawyersTo validate term sheet math and explain conversion (including interest) to clients.
Students & AnalystsTo understand convertible note mechanics: interest accrual, cap, discount, and conversion amount.
Limitations & Accuracy nuances
Simple interest: This calculator uses simple interest; if your note uses compound or PIK interest, adjust the conversion amount manually.
Ownership %: Excludes new round shares and option pool; use a full cap table for exact dilution.
Multiple notes: Convert in a defined order; model each note and the round together for accuracy.
Real-World Examples
Case A: Cap applies (high round valuation)
$100K note, 8% interest, 18 months to conversion → accrued interest ≈ $12K. Conversion amount = $112K. $5M cap, 20% discount. Series A at $12M pre-money, $2/share. Cap price = $5M ÷ 6M = $0.833; discount price = $2 × 0.8 = $1.60. Conversion at $0.833 (cap) → ~134,000 shares.
Case B: Discount applies (round near cap)
Same $100K note, $12K interest, $112K conversion. $5M cap, 20% discount. Series A at $4M pre-money, $0.40/share. Cap price = $5M ÷ 10M = $0.50; discount price = $0.40 × 0.8 = $0.32. Conversion at $0.32 (discount) → 350,000 shares. The discount gave the better rate.
Summary
The Convertible Note Conversion Calculator computes accrued interest, conversion amount (principal + interest), conversion price (lesser of cap and discount price), shares issued, and approximate ownership for a single convertible note at a qualifying equity round.
For SAFEs (no interest), use the SAFE Note Conversion Calculator.
Use this tool to validate term sheets and plan cap table impact; for multiple notes and full dilution, use an equity cap table or full model.
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Calculate convertible note conversion including accrued interest. Converts principal + interest at the lesser of cap or discount price.
How to use Convertible Note Conversion Calculator
Step-by-step guide to using the Convertible Note Conversion Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Convertible Note Conversion Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Convertible Note Conversion Calculator is designed to be user-friendly and provide instant calculations.
Is the Convertible Note Conversion Calculator free to use?
Yes, the Convertible Note Conversion Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Convertible Note Conversion Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Convertible Note Conversion Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.