A Convertible Debt Agreement is a contract between a lender and a borrower that allows the lender to convert their debt into equity. This type of agreement usually comes with certain conditions, like a minimum purchase price or a specific conversion ratio. It’s a way for entrepreneurs to secure funding without giving up total control, and for investors to get in on the ground floor of a potentially promising venture. By using convertible debt agreements, businesses can benefit from the flexibility and low cost that debt financing provides, while also maintaining the potential for higher returns associated with equity investments.