Convertible Note Maturity: What Happens When Notes Come Due
A convertible note is supposed to turn into equity at your next priced round. But every note also has a maturity date, and sometimes that date arrives before the round does. Here is what maturity really means, what your options are, and how to handle the conversation with your noteholders calmly and early.
Key takeaways
- Convertible notes are debt with a maturity date. At maturity the parties may extend, convert at an agreed price, or, rarely, repay.
- Most founders negotiate an extension, and most early investors would rather extend than force repayment.
- Start the conversation at least a few months before the date, not the week it arrives.
- Your note's exact wording, plus any majority-holder amendment clause, decides what is possible. Read it before you call anyone.
Mid-December is when many founders open their fundraising folder to plan the new year and notice something uncomfortable: a note signed eighteen months or two years ago is due early next year. If that is you, take a breath. Notes reaching maturity without a priced round is common, and there is a well-worn path through it.
This article explains that path in plain terms. It is general information, not legal or financial advice. Because notes are contracts and the details vary, involve a startup lawyer before you sign any amendment.
A quick refresher: what a convertible note is
A convertible note is a short-term loan from an investor to your company that is designed to convert into shares instead of being paid back in cash. Notes are a popular way to raise early money or bridge rounds, because they let you postpone setting a valuation until a later priced round.
Most notes share a few standard terms:
- Principal: the amount the investor lent.
- Interest: notes usually accrue interest, which is normally added to the amount that converts rather than paid in cash.
- Valuation cap and discount: the terms that decide the conversion price at the next round. With a discount, the conversion price is the round price times (1 minus the discount). If there is both a cap and a discount, the investor usually gets whichever gives the lower price.
- Qualified financing: the size and type of round that triggers automatic conversion.
- Maturity date: the date when the loan is due if it has not converted.
That last term is the reason notes are different from SAFEs. A SAFE is not debt and usually has no maturity date. A note is debt, so it eventually comes due.
What actually happens at maturity
When the maturity date arrives and the note has not converted, the note is technically due. What happens next depends on the note's wording and on what you and your noteholders agree. In practice there are three paths.
Path 1: extend the maturity date
This is by far the most common outcome. You and the noteholders sign an amendment that moves the maturity date out, often by twelve to twenty-four months, sometimes with small changes to other terms. Investors who backed you early generally want the company to keep going and reach a priced round. Forcing repayment would often hurt them as much as you.
Path 2: convert at an agreed price
Many notes include a maturity conversion clause that lets the holders, or both sides, convert the note into shares at maturity at a preset price, often linked to the valuation cap. Sometimes the conversion is into common stock or a simple preferred share class. If your note does not have this clause, the parties can still agree to convert through an amendment.
Path 3: repay the note
Repayment of principal plus accrued interest is possible, but it is rare. Most early-stage companies do not have spare cash for it, and most note investors did not invest hoping for their money back with interest. Repayment usually happens only when the company is doing well and wants to clean up its cap table, or when the relationship has broken down.
Common mistake
Assuming the date will pass without consequence because "no one will call the loan." Even friendly investors may change funds, change priorities or need to report the overdue status internally. An expired note also raises questions in due diligence. Treat the maturity date as a real deadline, even if you expect a smooth extension.
Read your note before you do anything
Every conversation goes better when you know exactly what your documents say. Pull every note and look for these clauses.
- The maturity date itself for each note. Notes signed at different times often mature at different times.
- Maturity conversion rights: who can choose to convert at maturity, into what class of stock, and at what price.
- Amendment clause: many notes allow amendments with the consent of holders of a majority of the outstanding principal, which then bind all holders. Others need every holder to sign.
- Events of default: what counts as default and what the holder can do about it.
- Security: most early-stage notes are unsecured, but check. A secured note gives the holder rights over company assets.
- Interest terms: how interest accrues and whether it converts too.
Pro tip
If your notes allow majority-holder amendments, identify the smallest group of holders that adds up to a majority of principal. Talking to them first, in person or by video, is usually the quickest way to agree terms that then apply to everyone. Still keep every holder informed, because nobody likes learning about changes to their investment second-hand.
How to negotiate an extension, step by step
Most extension conversations are short and friendly when you prepare. Here is a sequence that works.
- Build a note tracker. List every note, its principal, signing date, maturity date, cap, discount and holder contact. (A template follows below.)
- Talk to your lawyer. Confirm what the amendment clause allows and ask for a short amendment draft so you can share something concrete.
- Prepare a company update. Holders will ask why there has been no priced round. Have an honest one-page update ready: progress, cash runway, plans for the next round and why more time helps.
- Decide what you are asking for. Usually a new maturity date. Know in advance whether you are open to small sweeteners and where your limits are.
- Start with your largest or most supportive holder. A lead holder who agrees first often makes the rest easier.
- Send the amendment to everyone. Use a clear email, the update and the document for signature. Set a reasonable reply deadline well before the maturity date.
- Chase gently and track signatures. Update the tracker as each signature arrives.
- File the signed amendment with the original notes and update your cap table records.
What investors might ask for in return
Some holders sign an extension with no changes. Others may ask for something in exchange for more time. Common requests include a lower valuation cap, a bigger discount, an adjustment to the interest terms, or a maturity conversion right if the note did not already have one. None of these are automatic. Weigh each request against the dilution it creates and discuss it with your lawyer before you agree.
Example
Imagine Kiran runs a small software company that raised $300,000 (example amount) in notes from six angels two years ago. The notes mature on 31 March, and the priced round is now planned for the summer. In mid-December Kiran builds a tracker, confirms with a lawyer that holders of a majority of principal can amend all the notes, and calls the two largest angels in early January with a one-page update. Both agree to a twelve-month extension with no other changes. Kiran then emails all six holders the amendment, and every signature is in by the end of February, a month before the deadline. (All names, amounts and dates are made up.)
A convertible note maturity tracker template
Copy this into a spreadsheet and add one row per note. The figures shown are made-up examples.
| Holder | Principal | Signed | Maturity date | Cap and discount | Amendment status | New maturity |
|---|---|---|---|---|---|---|
| Angel A | $100,000 (example) | 2026-03-15 | 2028-03-15 | Cap $6M, 20% discount (example) | Signed | 2029-03-15 |
| Angel B | $50,000 (example) | 2026-04-02 | 2028-04-02 | Cap $6M, 20% discount (example) | Sent, awaiting reply | 2029-04-02 |
| Angel syndicate SPV | $150,000 (example) | 2026-05-20 | 2028-05-20 | Cap $6M, 20% discount (example) | Call scheduled | To be agreed |
Add columns for accrued interest and holder contact details if that helps. Keep the tracker next to your cap table so both stay in sync.
Email template for opening the conversation
Here is a short email you can adapt. Keep it honest, brief and specific.
Template: maturity extension request
Subject: Your [Company] convertible note and a proposed extension
Hi [Name],
Thank you again for backing [Company] early. I wanted to reach out well before your note's maturity date of [date] to share an update and a proposal.
Since you invested, we have [two or three concrete milestones]. We now plan to raise a priced round in [timeframe], which would convert your note under its existing terms.
To give us room to reach that round, we are proposing to extend the maturity date to [new date], with all other terms unchanged. Our lawyer has prepared a short amendment, attached for your review.
I would be glad to talk this through by phone. Could you let me know your thoughts by [reply date]?
Best regards,
[Your name]
Pro tip
Do not send amendment emails during the last week of December. Many investors are offline, and an unexpected legal document on a holiday rarely gets the attention it deserves. Prepare everything now, then send in the first or second week of January.
Other things to think about
Tax and accounting treatment
Interest that accrues on notes, and the way an extension or conversion is recorded, can have tax and accounting consequences for the company and the investors. These rules differ between the US, the UK and other countries. Ask your accountant how the extension should be recorded before you file your next accounts.
Your next round
New investors will look at your outstanding notes during due diligence. Notes that are past maturity with no amendment can raise questions about your relationship with existing investors and how carefully you manage your obligations. A signed extension shows the opposite: a calm, organized founder.
When the relationship is strained
Occasionally a holder refuses to extend and demands repayment. If that happens, slow down and get legal advice before you respond. Your options will depend on the note's terms, whether a majority amendment binds that holder, and the company's cash position. Avoid promises you cannot keep.
Common mistake
Letting different notes mature at scattered dates and extending them one at a time. If you have several notes, consider aligning them to a single new maturity date in one amendment. It makes tracking easier and keeps all holders on the same footing.
Your note maturity action checklist
- Collect every convertible note and any earlier amendments
- Build a tracker with maturity dates, caps, discounts and holders
- Flag any note maturing in the next six months
- Ask your lawyer what the amendment clause allows
- Prepare a one-page company update for holders
- Decide what extension you are asking for and your limits
- Call your largest holders first, then send the amendment to all
- File signed amendments and update your cap table records
Frequently asked questions
Can a noteholder force my company into bankruptcy at maturity?
An unpaid note is a debt, so in theory a holder may have legal remedies. In practice, early-stage note investors rarely take aggressive action because it destroys the value of their own investment. If a holder threatens this, speak to a lawyer immediately.
How far in advance should I ask for an extension?
A common rule of thumb is to start three to six months before the maturity date. That gives you time for legal drafting, conversations and signatures without pressure.
Does extending a note change the valuation cap?
Not automatically. An extension only changes what the amendment says. Some investors ask for a lower cap in exchange for more time, and you can agree, counter or decline.
Should I use SAFEs instead of notes next time?
Many founders do, because SAFEs usually have no maturity date or interest. Notes can still make sense in some situations. Talk with your lawyer about what fits your next raise.
Related reading
The bottom line
A convertible note maturity date is a deadline, not a disaster. Know your documents, track every note, and start talking to your holders months before anything is due. In most cases a short, friendly extension buys the time you need to reach your priced round.
Use these last weeks of the year to build your tracker and prepare your update, then open the conversation in early January. Your investors backed you once already, and handling this calmly is a great way to earn their support again.
