Let's say you want to set up a convertible loan for $100,000 that the company receives in December 2016 that will provide cash for the company until it has a major funding round of, say, $1,000,000 in July 2017. Furthermore, let's assume that you assume that the major round will sell shares at $1.00 per share but you will be offering a 20% discount to the investors who participate in the convertible note. Here is how to set it up:
First, set up the loan in Offtoa. Go to Assumptions/Financing/Loans. Add a new loan. Enter the loan details as follows:
Next, set up the conversion of the loan into an investment. Go to Assumptions/Financing/Investments/Investors. Add a new investment. Enter the investment details as follows:
Finally, set up the actual investment round. Go to Assumptions/Financing/Investments/Investors. Add a new investment. Enter the investment details as follows:
If you do the above and then examine the monthly cash flow statement, you will see an infusion of $100,000 (from the loan) in cash in December 2016 and $900,000 (from the additional investment) in cash in July 2017. The balance sheet for July 2017 will show an increase in cash or cash equivalents ($900,000), a decrease in short term liabilities ($100,000) and an increase in shareholders' equity ($1,000,000).
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