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A Convertible Loan Note lets investors lend money to startups with the option to convert their loan into shares later on. It's a popular investment tool in New Zealand's tech and growth sectors, offering a middle ground between straight debt and pure equity investment.

These notes typically convert to shares when the company hits specific triggers, like a major funding round or sale. They give early investors key benefits: earning interest while waiting to convert, getting a discount on future share prices, and maintaining priority over regular shareholders if things go wrong. Under NZ law, they're regulated as debt securities until conversion.

Consider using a Convertible Loan Note when your startup needs quick funding but can't agree on a company valuation with investors. This tool works particularly well for early-stage Kiwi companies raising between $50,000 and $2 million, especially when traditional equity rounds feel too complex or expensive.

It's also ideal when you want to delay valuation discussions until you have more concrete business metrics. NZ founders often use these notes during bridge rounds between major funding events, or when bringing in strategic investors who need time to evaluate the business fully. The built-in interest payments and conversion features protect both parties while maintaining flexibility.

• Basic Convertible Notes: Simple structure with standard interest rate and conversion discount, popular among NZ tech startups
• Capped Notes: Include a maximum valuation cap to protect investors from dilution in high-growth scenarios
• Interest-Free Notes: Focused purely on equity conversion without accruing interest, often used for friendly investors
• Multiple-Trigger Notes: Feature various conversion events beyond just funding rounds, like revenue targets or timeframes
• SAFE-Style Notes: Modified versions of Y Combinator's SAFE agreements, adapted for NZ legal requirements

• Startup Founders: Issue notes to raise capital while delaying formal valuation discussions and maintaining control
• Angel Investors: Provide early-stage funding while securing potential equity stakes and interest payments
• Corporate Lawyers: Draft and review note terms, ensuring compliance with NZ securities laws
• Accountants: Track note obligations, interest accrual, and conversion events for tax and reporting purposes
• Company Directors: Approve note issuance and manage investor relationships throughout the note's lifecycle
• Investment Advisors: Guide clients on note terms and negotiate conversion triggers and discounts

• Investment Terms: Determine loan amount, interest rate, and maturity date before starting
• Conversion Details: Define qualifying events, valuation caps, and discount rates for share conversion
• Company Information: Gather current shareholding structure, existing debt obligations, and financial statements
• Investor Details: Collect full legal names, addresses, and investment entity information
• Security Status: Decide if the note will be secured against company assets
• Board Approval: Ensure director resolutions are prepared for note issuance under NZ Companies Act
• Documentation: Use our platform to generate a legally compliant note that includes all required elements

• Loan Terms: Principal amount, interest rate, and maturity date clearly stated
• Conversion Mechanism: Detailed triggers, share class, and calculation method for equity conversion
• Party Details: Full legal names and addresses of company and noteholders
• Security Status: Clear statement on secured or unsecured status of the note
• Default Provisions: Consequences and remedies for payment or covenant breaches
• Governing Law: Explicit reference to New Zealand law and jurisdiction
• Transfer Rights: Rules for transferring or assigning the note to other parties
• Signature Block: Proper execution clauses for all parties under NZ requirements

A Convertible Loan Note differs significantly from a Loan Agreement in several key ways, though both involve lending money. The main distinction lies in their ultimate purpose and flexibility.

• Investment Intent: Convertible Loan Notes are designed primarily as investment vehicles with future equity conversion in mind, while Loan Agreements focus purely on debt repayment
• Repayment Structure: Loan Agreements require fixed repayment schedules, whereas Convertible Notes often defer repayment until conversion or maturity
• Valuation Approach: Convertible Notes deliberately delay company valuation discussions, but Loan Agreements don't involve valuation considerations
• Security Requirements: Standard Loan Agreements typically require specific security or guarantees, while Convertible Notes often remain unsecured
• Regulatory Treatment: Under NZ law, Convertible Notes face additional securities regulations due to their investment nature