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Convertible Loan Notes (CLNs)
Convertible loan notes (CLN) are interest-bearing debt instruments with covenants that allow investors to convert principal and accrued interest into equity. In the case of growth companies or start-ups, conversion can be scheduled to occur at the time of a next qualifying funding round – and at a discount to the price of the qualifying funding round. In some cases, if a funding round does not take place prior to the maturity date of the CLN, conversion automatically takes place at a pre-set conversion price.