A convertible loan is a type of financing where the lending capital (money) can become converted into equity or shares of the borrower’s entity. In this case, the promoter of the project, funded through GoParity, is the borrower, and the GoParity investor is the lender. has the option, executable over a determined period of time or event, to convert the amount borrowed to the promoter into equity or shares in the promoter’s organization.
To convert the debt, it is necessary to define the conversion conditions, or price, which determine the amount of equity/shares that correspond to the amount of debt to be converted. The conversion conditions are specified in the loan agreement between the borrower/promotor and the lender/investor.
For example, in the Biovilla project, it was established that investors have the option to convert their outstanding capital into Biovilla cooperative shares, before and up to the end of the 12th month of the operation's term. The conditions for conversion are as follows:
The minimum convertible amount is 2,000€.
Each share costs 500€, so the minimum number of shares bought through conversion is four.
The deadline for conversion of the outstanding capital is the end of the 12th month of the operation.
Access here to learn more about converting the debt operationally and contractually.