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A Convertible Loan Note is a flexible financing tool that lets startups borrow money from investors now and convert that debt into equity shares later. It works like a regular loan at first, but automatically transforms into company ownership when specific events happen, like a major funding round or company sale.

Under Austrian corporate law, these notes offer key advantages for early-stage investments. Investors earn interest while avoiding complex share valuations until the business is more mature. Startups benefit too - they can delay setting a firm company value and keep their cap table clean. The conversion terms must follow Austrian GmbH regulations, typically triggering when the company raises €500,000 or more in new funding.

Use a Convertible Loan Note when your startup needs quick funding but isn't ready to set a firm company valuation. This financing tool proves especially valuable for Austrian tech startups and early-stage companies that need capital immediately while still developing their business model or waiting for market validation.

The note works perfectly when you've found investors who believe in your vision but agree it's too early for detailed equity negotiations. Under Austrian law, it lets you access funds now while postponing complex valuation discussions until your next major funding round. It's particularly useful during rapid growth phases or when you're approaching a significant business milestone that will better demonstrate your company's worth.

• Standard Fixed-Rate Notes: Basic convertible loans with predetermined interest rates and conversion terms, commonly used by Austrian SMEs seeking straightforward financing
• Discount-Based Notes: Include a conversion discount of 10-30% off future equity rounds, incentivizing early investors under Austrian corporate law
• Valuation Cap Notes: Set maximum conversion prices to protect investors during high-growth scenarios, popular among Austrian tech startups
• Interest-Free Notes: Structured without interest payments but offering equity-only returns, suitable for family-and-friends funding rounds
• Mandatory Conversion Notes: Automatically convert to shares at specific triggers like funding rounds or exits, common in accelerator programs

• Startup Founders: Sign and negotiate the notes as company representatives, often seeking bridge financing between formal funding rounds
• Angel Investors: Provide the initial capital and negotiate conversion terms, typically investing €25,000 to €250,000 per note
• Corporate Lawyers: Draft and review the agreements to ensure compliance with Austrian GmbH law and protect both parties' interests
• Business Accelerators: Often use standardized convertible notes for their startup investment programs
• Tax Advisors: Guide both parties on Austrian tax implications of debt-to-equity conversion and interest payments
• Company Directors: Must approve and execute the notes as part of their corporate governance duties

• Company Details: Gather current business registration, shareholding structure, and articles of association
• Investment Terms: Define loan amount, interest rate, maturity date, and conversion triggers
• Valuation Metrics: Determine discount rate or valuation cap for future equity conversion
• Investor Information: Collect KYC documentation and proof of funds as required by Austrian banking laws
• Board Approval: Secure necessary corporate authorizations and shareholder consents
• Financial Projections: Prepare realistic scenarios for conversion events and capital structure impact
• Documentation Review: Our platform generates legally sound notes tailored to Austrian requirements

• Loan Terms: Principal amount, interest rate, and maturity date as required by Austrian banking law
• Conversion Mechanics: Detailed triggers, pricing formulas, and share class specifications
• Party Information: Full legal names, registration numbers, and authorized signatories
• Security Provisions: Any collateral arrangements or subordination terms
• Default Clauses: Specific events and remedies under Austrian enforcement law
• Governing Law: Explicit reference to Austrian jurisdiction and applicable regulations
• Change Controls: Rules for amendments and transfer restrictions
• Reporting Requirements: Financial information rights and notification obligations

Convertible Loan Notes differ significantly from a standard Loan Agreement in both structure and purpose. While both involve lending money, their outcomes and legal implications under Austrian law are quite different.

• Repayment Structure: Loan Agreements require cash repayment with interest, while Convertible Notes typically convert to equity shares
• Investment Purpose: Loan Agreements focus on debt financing with fixed returns, whereas Convertible Notes aim for future equity participation
• Risk Profile: Traditional loans require collateral or personal guarantees, but Convertible Notes often rely on future company success
• Documentation: Loan Agreements need extensive credit checks and security documentation; Convertible Notes prioritize conversion terms and valuation mechanisms
• Legal Framework: Under Austrian law, Convertible Notes must comply with both lending and corporate regulations, while Loan Agreements follow simpler banking rules