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Start-ups that are looking to raise funding should understand many of the legal documents that are involved. Over a $100 Billion Dollars were raised in 2018, and it is important to understand these documents to increase your chances of success. Below are 4 sample documents that will help entrepreneurs on their journey.
Promissory Loan Note
When individuals are looking to raise capital to grow their business or make a large purchase, a loan is a great way to do this. Many times entrepreneurs can receive a loan from Friends & Family, an often overlooked source of funding. Loans are great for:
Here is a Sample Promissory Loan Note Document.
2. Convertible Debt Contract
Convertible Debt combines the benefits of both a loan and ownership. This funding will begin as a loan, but can convert or change into equity of the start-up when an event such as raising a round of Venture Capital funding occurs.
Here is a Sample Convertible Debt Contract.
3. Term Sheet
The Term Sheet is one of the most important documents in Start-up because this, in many way, is the first real sign that an entrepreneur is actually going to raise funding. The Term Sheet is typically a non-binding agreement between the start-up entrepreneur and a venture capital firm.
Here is a Sample Term Sheet.
4. Letter of Intent
The Letter of Intent is a typically a non-binding agreement between the start-up and the corporation that is acquiring the startup. The are two main forms of acquisitions: an asset deal or a stock deal. Start-ups must have a great exit strategy and the Letter of Intent is a great initial document that start-ups must understand.
Here is a Sample Letter of Intent
When a person wants to declare that a particular set of facts are true, an affidavit is a great legal document to use. An affidavit is a sworn written statement about facts that the individual holds to be true. This is typically sworn to in front of an officer such as a notary public.
An affidavit is used for many reasons such as:
To show ownership of items
Real Estate Transactions
Testimony for people that are unavailable to appear in court for reasons such as illness, death, or out of the country.
Here is a Sample General Affidavit Document.
When individuals are planning for retirement, a living trust is a great legal document to use. A living trust has some advantages over a Last Will and Testament, (often simply referred to as a Will) because a living trust does not have Probate Court costs.
It is vital for individuals to prepare for what happens to their property and finances, in case of death or retirement.
Here is a Sample General Living Trust Document.
Power of Attorney - Medical
Often times, elderly or disabled individuals are unable to make decisions regarding their own health care. A Medical Power of Attorney is a legal document that allows a person to make health decisions for someone that is unable to make them. This selected person becomes the representative for purposes of healthcare decisions.
Here is a Sample Medical Power of Attorney.
In the United States, an individual’s credit score is very important. With a good credit score, an individual can borrow money to purchase goods and services such as:
If you are an immigrant in the United States or a person without any credit, using secured credit cards and lines of credit are a great way to build a good credit score.
However, often times, individuals fail to pay bills for a variety of resources. Many of these items are overdue and in collections. There is hope and a person can actually begin to improve their credit with the help of these letters.
Here is a Sample Credit Report and Debt Validation Letter.