# Types of Capital

**CONVERTIBLE DEBT** Loan that can be converted into an equity investment at a future date or under certain circumstances. Upon conversion, the value of the debt is used to buy shares at a pre-negotiated, typically discounted price.

**EQUITY** Ownership of stock in an enterprise, purchased either directly from the company or from another investor. Equity investors may receive voting rights and/or board seats.

**GRANT** Financial award given to an organization to address a stated goal with no repayment obligation.

**GUARANTEE** Binding promise made by one individual or organization to cover the debts of another individual or organization in the event they cannot repay a debt.

**LINE OF CREDIT** Credit facility that can be drawn upon and replenished, typically to fund working capital. The line can include commitment fees as well as interest rate charges.

**PREFERRED EQUITY** Preferred equity investments give the investor a higher claim to dividends or asset distribution than other equity positions.

**PURCHASE ORDER FINANCE** Loan made with an incoming receivable, such as a customer order or grant, used as collateral. Repayment occurs when the receivable is collected.

**RECOVERABLE GRANT** Grant made by nonprofit organizations or donors that, under predetermined circumstances, becomes repayable, potentially with interest.

**ROYALTY FINANCE** Loan with repayment obligations based on a percent of revenue.

**SAFE** Simple Agreement for Future - Equity that provides rights to an investor for future equity without determining a specific price per share until a later priced round or liquidity event occurs. Often used with start-ups.

**TERM LOAN** Loan that is repaid in regular payments over a set period of time, usually greater than one year. Term loans can have a range of interest rates and amortization schedules.