2 min read
Definition
A convertible loan note is a loan note that can convert into shares, usually at a future equity round, often with a discount or valuation cap rewarding the early lender.
In plain terms
Investors lend money now that becomes shares later. It avoids arguing about valuation today by pushing that decision to the next round.
Why it matters for your company
CLNs raise capital quickly without setting a valuation upfront, but they can dilute later. For established, cash-generative firms, straightforward debt via a business loan avoids dilution entirely. See equity injection.
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