Document background
The Convertible Loan Note Agreement is commonly used in growth-stage financing scenarios where companies seek flexible funding solutions. It provides investors with the security of debt while maintaining the upside potential of equity investment. This document type is particularly relevant in the German market where it must comply with specific requirements of German corporate and securities laws, including the GmbH-Gesetz and AktG for conversion mechanics. The agreement typically includes provisions for loan terms, interest rates, conversion triggers (such as qualified financing rounds or exits), conversion price calculations, and investor protections. It serves as a bridge between standard loan agreements and equity investments, making it particularly attractive for startups and scale-ups seeking growth capital while deferring company valuation discussions.
