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A Convertible Loan Note is a funding tool that lets startups receive money as a loan that can later turn into shares. Swiss companies often use these notes when they're not ready to set a firm company value but need quick access to capital. The loan starts earning interest like regular debt, but converts to equity during the next investment round or another trigger event.

Under Swiss law, these notes offer flexibility for both investors and founders. Investors get the security of debt with potential equity upside, while startups benefit from simpler paperwork and lower legal costs compared to immediate equity deals. The conversion terms, including discount rates and valuation caps, are typically set when signing the agreement.

Use a Convertible Loan Note when your Swiss startup needs quick funding but isn't ready to set a firm valuation. This instrument works particularly well during seed rounds or bridge financing, where traditional equity investment might be too complex or time-consuming. It's especially valuable for early-stage companies with high growth potential but limited operating history.

The note becomes most useful when you're expecting a larger funding round within 12-18 months. Swiss companies often choose this option to avoid complex shareholder agreements early on, while giving investors the security of debt plus future equity potential. It's also ideal when you need to close multiple small investments quickly without coordinating all investors simultaneously.

• Basic Convertible Notes: Standard structure with principal, interest rate, and maturity date, commonly used by Swiss tech startups
• Valuation Cap Notes: Include a maximum conversion price to protect early investors from dilution in high-growth scenarios
• Discount Notes: Offer percentage discounts on future funding rounds, popular among Swiss angel investors
• Bridge Notes: Short-term instruments with automatic conversion triggers, designed for interim financing
• Participating Notes: Give holders rights to participate in future rounds while maintaining debt protection

• Startup Founders: Draft and sign Convertible Loan Notes to secure early-stage funding without immediate equity dilution
• Angel Investors: Provide capital through these notes, benefiting from potential equity conversion and interest payments
• Legal Counsel: Structure and review the notes to ensure compliance with Swiss corporate law and protect all parties
• Board Members: Approve and oversee the issuance of notes as part of company financing strategy
• Financial Advisors: Guide terms negotiation and valuation mechanics for future conversion events

• Company Details: Gather current share capital structure, articles of association, and shareholder information
• Investment Terms: Define loan amount, interest rate, maturity date, and conversion triggers
• Valuation Mechanics: Determine discount rate, valuation cap, and conversion price formula
• Security Measures: Specify any collateral or guarantees required under Swiss law
• Conversion Rights: Detail automatic and optional conversion scenarios, including qualifying financing rounds
• Regulatory Compliance: Ensure alignment with Swiss Code of Obligations and financial regulations

• Loan Terms: Principal amount, interest rate, and maturity date clearly stated in Swiss francs
• Conversion Mechanics: Detailed triggers, price calculations, and share class specifications
• Party Details: Full legal names, addresses, and registration numbers of lender and borrower
• Security Provisions: Any collateral arrangements or subordination agreements
• Default Clauses: Events of default and corresponding remedies under Swiss law
• Governing Law: Explicit reference to Swiss law and jurisdiction for dispute resolution
• Representations: Company's authority to issue the note and validity of obligations

A Convertible Loan Note differs significantly from a Loan Agreement in several key aspects, though both are debt instruments under Swiss law. The main distinction lies in their ultimate purpose and flexibility.

• Future Equity Conversion: Convertible Loan Notes automatically transform into equity under specified conditions, while Loan Agreements remain pure debt until repayment
• Interest Treatment: Convertible notes often accrue interest that converts to equity along with the principal, whereas traditional loans require regular interest payments
• Valuation Mechanics: Convertible notes include specific provisions for future equity pricing and discounts, which aren't present in standard loan agreements
• Default Remedies: Loan agreements typically have immediate repayment rights upon default, while convertible notes may offer more flexible resolution options
• Documentation Complexity: Convertible notes require additional terms around conversion triggers and share calculations, making them more complex than basic loan documentation