Glossary · Your money in the deal
Convertible Debt
In short
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 deal
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.
Related terms
Common questions about Convertible Debt
- When does a convertible note held by an investor trigger affiliation for size standards?
- Can I use an SBA 7(a) loan for debt consolidation of existing business debts?
- How is prior owner debt converted to equity treated for injection purposes?
- Can I use an SBA 7(a) loan to refinance existing business debt?
- Can an SBA 7(a) loan be used to refinance existing business debt?
- Can I use an SBA 7(a) loan to pay off personal debt?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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