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The Cap Table is a unique type of convertible note available only to people who hold non-recourse personal loans. It is also known as the 100% loan-to-value convertible note. A Cap Table is created when the buyer or holder of the convertible note combines one or more notes into one loan with a single interest rate. These instruments, also called "call options," can only be converted if the holder or buyer pays the debt within a specified time frame. If you purchase a Cap Table it is important that you understand how and where to obtain one. In this article, we'll explain how Cap Tables work.First, remember that a note is simply a promise to pay the lender some money in the form of a regular payment if the debtor defaults on his or her loan. The original lender, also known as the note holder, receives interest on the principal balance. This interest is often referred to as the "writer's fee." One can receive cash flow notes for a variety of reasons. For example, some companies issue notes to provide new financing opportunities for buyers who are waiting on long-awaited capital raises.The primary cap table offers two different interest rates. The first rate is called the "call" rate and is the most common. Call rates are based on an economic index that reflects the interest rate of ten-year US dollars. The second rate is the "put" rate and is used when the holder or buyer of the convertible note purchases another note for the same company, but at a different credit rating. Here are some examples:You purchase a convertible note from a company called XYZ Credit Lending. The next day, the company issues its first credit to XYZ. At the end of the business day, the conversion ratio is calculated. The Cap Table converts the note to a "call" and gives you the buyer the right to sell the note for a predetermined price. During the first business day, the convertible note has no interest. The second day, the holder or buyer of the note purchases a call option.If you choose to sell, the convertible note will be converted into a Class A in most states. You will pay a specified price to complete the transaction. The price paid to purchase the note is generally much less than the value of the note. The value of the note becomes negotiable once the buyer has purchased an option or put option.You can choose to either participate in the purchase price or sell the convertible note as an individual investor. However, startups must know that participating in the purchase price may limit your investment options. If you decide to invest through a broker, he or she will tell you what type of participation rights you have.One of the advantages of dealing with a note broker or note investing firm is that they can offer investment programs such as penny stocks and options. There are many brokers and firms that focus on this type of investment. There are some investment programs specifically for people who are new to the investment world. These programs help beginner investors by providing financial education and resources.Remember, if you are considering purchasing convertible notes, be sure to do your research first. You want to get informed so that you can make the best decision for your individual needs. There is a lot to learn about convertible notes, but it doesn't have to be difficult. Look online for information on different companies that offer these investment programs. Compare notes and find the one that best suits your needs.
