{"ok":true,"canonical_url":"https://www.capbench.com/glossary/convertible-debt","api_url":"https://www.capbench.com/api/public/glossary/convertible-debt","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-17","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","CapBench lender and franchise enrichment"],"term":{"slug":"convertible-debt","term":"Convertible Debt","group":"Your money in the deal","definition":"A type of loan that can be converted into equity (ownership) in the company instead of being repaid with cash. As a buyer, you need to understand if any existing convertible debt will convert before or after your acquisition, impacting your ownership stake.","what_it_means":"In a 7(a) acquisition, you're buying a business, not lending to it. Any existing convertible debt will either need to be paid off at closing, or convert into equity for the seller or a third party, affecting the capital structure you inherit. Make sure the deal terms clarify how this debt is handled.","url":"https://www.capbench.com/glossary/convertible-debt","official_sources":[],"related":[{"slug":"seller-note","term":"Seller note","url":"https://www.capbench.com/glossary/seller-note"},{"slug":"equity-injection","term":"Equity injection","url":"https://www.capbench.com/glossary/equity-injection"},{"slug":"subordinated-debt","term":"Subordinated Debt","url":"https://www.capbench.com/glossary/subordinated-debt"},{"slug":"total-project-costs","term":"Total project costs","url":"https://www.capbench.com/glossary/total-project-costs"}],"related_questions":[{"question":"When does a convertible note held by an investor trigger affiliation for size standards?","url":"https://www.capbench.com/for-lenders/questions/when-does-a-convertible-note-held-by-an-investor-trigger-affiliation-for-size-standards"},{"question":"Can I use an SBA 7(a) loan for debt consolidation of existing business debts?","url":"https://www.capbench.com/sba-7a/questions/can-i-use-an-sba-7-a-loan-for-debt-consolidation-of-existing-business-debts"},{"question":"How is prior owner debt converted to equity treated for injection purposes?","url":"https://www.capbench.com/for-lenders/questions/how-is-prior-owner-debt-converted-to-equity-treated-for-injection-purposes"},{"question":"Can I use an SBA 7(a) loan to refinance existing business debt?","url":"https://www.capbench.com/sba-7a/questions/can-i-use-an-sba-7-a-loan-to-refinance-existing-business-debt"},{"question":"Can an SBA 7(a) loan be used to refinance existing business debt?","url":"https://www.capbench.com/sba-7a/questions/can-an-sba-7-a-loan-be-used-to-refinance-existing-business-debt"},{"question":"Can I use an SBA 7(a) loan to pay off personal debt?","url":"https://www.capbench.com/sba-7a/questions/can-i-use-an-sba-7-a-loan-to-pay-off-personal-debt"}]},"caveats":["Definitions represent CapBench's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"CapBench Glossary — Convertible Debt","url":"https://www.capbench.com/glossary/convertible-debt","source_type":"CapBench Data"}}