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How convertible debt works with simple explained example

How convertible debt works

A start-up company without a credit history doesn’t have an established track record and therefore lacks credibility with conventional lenders such as banks. Therefore, most start-up companies prefer to raise fund from investors. In order to raise fund via equity, most start-up companies need to calculate their face value. But, at the beginning stage of companies, it is impossible to figure out and calculate the business value. So, the convertible debt notes were primarily created to help start-up companies raise fund.

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