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A Convertible Loan Note lets investors lend money to startups with the option to convert their loan into shares later. It's a popular funding tool in Singapore's startup ecosystem, especially when it's too early to set a firm company valuation.

These notes typically convert to equity during the next funding round, often at a discount to reward early investors. Under Singapore law, they offer more flexibility than straight equity and give lenders better protection than standard loans. Most notes include key terms like interest rates, maturity dates, and specific conversion triggers - such as Series A funding or an IPO.

Consider using a Convertible Loan Note when your startup needs quick funding but setting a fair valuation is challenging. This instrument works especially well for early-stage Singapore companies raising bridge rounds between major funding milestones, or when market conditions make traditional equity rounds difficult.

The best timing is during rapid growth phases when your valuation is likely to increase significantly. It helps avoid lengthy negotiations over current share prices while giving investors the security of debt with upside potential. Many Singapore tech startups use these notes for raising S$50,000 to S$1 million from angel investors or early-stage venture funds.

• Basic Fixed-Term Notes: Standard Convertible Loan Notes with set maturity dates and predetermined conversion prices, commonly used by early-stage startups
• Discount-Based Notes: Offers investors a discount on the next funding round's share price, typically 10-30% in Singapore's startup scene
• Valuation Cap Notes: Sets a maximum company valuation for conversion, protecting investors if the startup's value soars
• Interest-Bearing Notes: Includes regular interest payments until conversion, popular among more established companies
• SAFE-Style Notes: Simplified versions without maturity dates, inspired by Y Combinator's SAFE but adapted for Singapore's legal framework

• Startup Founders: Issue Convertible Loan Notes to raise capital without immediately diluting equity or setting firm valuations
• Angel Investors: Provide early-stage funding while securing potential equity stakes at favorable future terms
• Corporate Lawyers: Draft and review note terms, ensuring compliance with Singapore's Companies Act and MAS regulations
• Venture Capital Firms: Use notes for bridge financing between larger funding rounds
• Company Directors: Must approve and execute the notes as part of their fiduciary duties
• Company Secretaries: Handle documentation, filing, and maintaining proper records of note issuance

• Company Details: Gather current share structure, latest valuation, and registration documents
• Investment Terms: Define loan amount, interest rate, maturity date, and conversion discount
• Trigger Events: Specify conditions that activate conversion, like funding rounds or exit events
• Board Approval: Secure directors' resolution authorizing the note issuance
• Due Diligence: Prepare financial statements and business plans for investor review
• Legal Requirements: Check MAS guidelines and Companies Act compliance for note issuance
• Documentation: Use our platform to generate a properly structured note that includes all mandatory elements

• Loan Terms: Principal amount, interest rate, and repayment schedule clearly stated
• Conversion Rights: Detailed mechanics and pricing for converting debt to equity
• Qualifying Events: Specific circumstances triggering automatic or optional conversion
• Security Provisions: Any collateral or guarantees securing the loan
• Default Clauses: Consequences and remedies for payment failures
• Governing Law: Explicit reference to Singapore law and jurisdiction
• Party Details: Full legal names, registration numbers, and authorized signatories
• Investor Rights: Information rights and any pre-emptive privileges

A Convertible Loan Note differs significantly from a Loan Agreement in both structure and purpose. While both involve lending money, their outcomes and protections vary considerably under Singapore law.

• Investment Intent: Convertible Loan Notes are designed primarily as investment vehicles with equity conversion rights, while Loan Agreements focus purely on debt repayment
• Flexibility: Notes offer variable returns through potential equity conversion, whereas Loan Agreements have fixed repayment terms
• Security Requirements: Standard Loan Agreements often require specific collateral, while Notes typically rely on the company's future equity as security
• Default Remedies: Loan Agreements provide immediate recovery rights upon default, but Notes may offer conversion options instead of immediate repayment
• Regulatory Treatment: Under MAS guidelines, Notes face different regulatory requirements regarding investor qualifications and disclosure obligations