A Convertible Note Agreement is a legally binding agreement between an individual or company and an investor. It’s a type of debt instrument that allows investors to loan money to a business in exchange for the potential of a future return based on an agreed-upon conversion ratio. This can take the form of equity, stock options, or other securities. Through this agreement, the investor takes on a higher risk associated with investing in a startup, but also has the potential for a much larger return should the business become successful and the value of its equity increase.