Since convertible loans are part debt and part equity, investors earn interest on the total loan amount over the term of the loan. In most cases, the interest is added to the principal each month, and not paid each month. Startup companies don't have a monthly bill to pay this way.

Do convertible debentures pay interest?

A convertible debenture is usually an unsecured bond or a loan as in there is no primary collateral interlinked to the debt. They are long-term debt securities that pay interest returns to the bondholder. A unique feature of convertible debentures is that they can be converted into stock at specified times.

Do all convertible notes have interest?

Most convertible notes have meager interest rates, with many notes issued at the lowest legal interest rates for debt financing. The reason behind this is that investors value the growth potential of future equity more than any short-term guarantees of cash through a true bond-like interest rate.