Convertible loans - fast and flexible startup financing
Convertible loans - fast and flexible startup financing
Convertible loans - fast and flexible startup financing
Preview of a convertible loan
PDF File - Convertible Loan (Preview)
Preview of a convertible loan
PDF File - Convertible Loan (Preview)
Convertible loans offer Swiss startups the opportunity to efficiently and straightforwardly raise initial investments from family, friends, and early-stage investors.
We support you by informing you about important contract points such as "Valuation Cap", "Discount", and "Conversion Terms", advising you in negotiations with investors, and drafting suitable investment contracts.
We support you by informing you about important contract points such as "Valuation Cap", "Discount", and "Conversion Terms", advising you in negotiations with investors, and drafting suitable investment contracts.
Preview of a convertible loan
PDF File - Convertible Loan (Preview)
Your Benefits at a Glance
Avoidance of future disputes
Protection of the company in case of changes in the founding team
Efficient conflict resolution without court proceedings
Attractiveness for investors and partners
Your Benefits at a Glance
Avoidance of future disputes
Protection of the company in case of changes in the founding team
Efficient conflict resolution without court proceedings
Attractiveness for investors and partners
Your Benefits at a Glance
Avoidance of future disputes
Protection of the company in case of changes in the founding team
Efficient conflict resolution without court proceedings
Attractiveness for investors and partners
What is a convertible loan?
Financing instrument for startups
Description
A convertible loan (Convertible Loan) is a financial instrument that allows investors to provide capital to a company in the form of a loan that can be converted into equity at a later point in time. This means that instead of a fixed repayment in the future, the investor receives shares in the company.
Functionality and conditions
Capital provision
The investor grants the startup a loan, which is initially recorded as debt on the company's books. The contract specifies the conditions for the later conversion to equity.
Conversion to equity
The loan is converted into shares of the company at a specific event, such as during a future financing round. This usually occurs at a pre-agreed discount on the then-current company valuation ("Discount") or at an agreed maximum valuation ("Valuation Cap").
Interest payment and repayment
Many convertible loans include an interest payment or a repayment option if there is no conversion. However, most investors aim for conversion into equity to participate in the long-term success of the company.
Potential challenges
Tax pitfalls
In Switzerland, convertible loans can have tax implications, particularly concerning the conversion of debt into equity. It is recommended to carefully examine the tax consequences to avoid unwanted burdens.
Issuance of company shares
When converting a convertible loan into equity, new shares are issued, leading to dilution of the existing shareholders' shares. Founders should be informed about the dilution effects and their consequences as part of scenario planning.
Uncertainty in conversion
Although a conversion is the goal, there is no guarantee that it will actually take place. This can present challenges for investors during times of economic uncertainty.
Loan conversion (examples)
Investment amount and conditions
Company valuation during conversion
Result after conversion
Scenario 1 (Cap Transformation)
Loan: CHF 400,000 with a valuation cap of CHF 4m and a discount of 20%
Loan: CHF 400,000 with a valuation cap of CHF 4m and a discount of 20%
Loan: CHF 400,000 with a valuation cap of CHF 4m and a discount of 20%
CHF 6m
CHF 6m
CHF 6m
Investor receives 10% of the shares (400,000 / 4,000,000 [Valuation Cap] = 0.1 = 10%)
Investor receives 10% of the shares (400,000 / 4,000,000 [Valuation Cap] = 0.1 = 10%)
Investor receives 10% of the shares (400,000 / 4,000,000 [Valuation Cap] = 0.1 = 10%)
Scenario 2 (Discount Conversion)
Loan: CHF 400,000 with a valuation cap of CHF 4m and a discount of 20%
Loan: CHF 400,000 with a valuation cap of CHF 4m and a discount of 20%
Loan: CHF 400,000 with a valuation cap of CHF 4m and a discount of 20%
CHF 4m
CHF 4m
CHF 4m
Investor receives 12.5% of the shares (400,000 / 3.2m [4m * discount rate of 0.8] = 0.125 = 12.5%)
Investor receives 12.5% of the shares (400,000 / 3.2m [4m * discount rate of 0.8] = 0.125 = 12.5%)
Investor receives 12.5% of the shares (400,000 / 3.2m [4m * discount rate of 0.8] = 0.125 = 12.5%)
Scenario 3 (Company Valuation)
Loan: CHF 400,000 without Valuation Cap and Discount
Loan: CHF 400,000 without Valuation Cap and Discount
Loan: CHF 400,000 without Valuation Cap and Discount
CHF 8m
CHF 8m
CHF 8m
Investor receives 5% of the shares (400,000 / 8,000,000 [company valuation] = 0.05 = 5%)
Investor receives 5% of the shares (400,000 / 8,000,000 [company valuation] = 0.05 = 5%)
Investor receives 5% of the shares (400,000 / 8,000,000 [company valuation] = 0.05 = 5%)
Our packages
Choose the package that suits your starting situation.
Startup Package
CHF 1,875
Includes
Kick-Off Meeting
Legal assessment of the initial situation
Consultation on valuation cap, discount, and conversion terms
Document creation
Feedback Round
Finalization and implementation
POPULAR
Startup Package
CHF 1,875
Includes
Kick-Off Meeting
Legal assessment of the initial situation
Consultation on valuation cap, discount, and conversion terms
Document creation
Feedback Round
Finalization and implementation
POPULAR
Startup Package
CHF 1,875
Includes
Kick-Off Meeting
Legal assessment of the initial situation
Consultation on valuation cap, discount, and conversion terms
Document creation
Feedback Round
Finalization and implementation
POPULAR
Scale-up Package
CHF 3,875
Includes:
Everything from the startup package
Essential negotiation support
Assessment of tax law aspects
Detailed Scenario Planning
Sparring partner for financing strategy
Scale-up Package
CHF 3,875
Includes:
Everything from the startup package
Essential negotiation support
Assessment of tax law aspects
Detailed Scenario Planning
Sparring partner for financing strategy
Scale-up Package
CHF 3,875
Includes:
Everything from the startup package
Essential negotiation support
Assessment of tax law aspects
Detailed Scenario Planning
Sparring partner for financing strategy
Lose-Win Guarantee
Your satisfaction is important to us. Therefore, we guarantee a full refund of the purchase price in case of dissatisfaction. The documents and recommendations prepared up to that point will remain available to you even after the refund.
Your satisfaction is important to us. Therefore, we guarantee a full refund of the purchase price in case of dissatisfaction. The documents and recommendations prepared up to that point will remain available to you even after the refund.
Feedback
Flurin Jenal
Founder of Stormed Inc.
"Marco knows exactly what startups need, offers his help directly, keeps everything lean, and enables fast implementation. Great!"
Desiree Pastore
Vice President, Relationship Manager at Neuberger Berman
"Marco provided me with extremely competent and timely advice on my legal questions regarding an extensive and complex employment contract. I can only recommend his legal consulting!"
Dieter Borer
Serial entrepreneur
"The ability to act quickly is essential in business. Marco enables me to do just that. I make business decisions on my own schedule, while he ensures that the associated legal risks are minimized."
Adelia Safina
Founder of UTEMPLA GmbH
"I asked Marco for help in obtaining a work permit in Switzerland. This task was almost insurmountable because I am Russian. Thanks to his excellent recommendations and his professional work, I received my work permit and can continue my journey as a startup founder!"
Daniel Koss
Founder of creable AG
"Marco advises my company competently, pragmatically, and above all immediately when a problem arises. Really top-notch advice!"
Daniel Svonava
Co-founder of Superlinked, Inc.
"As the founder of a software startup, I enjoy working with Marco because he understands how to combine thorough legal research with the context of a startup."
Marvin Sangines
Founder of notus GmbH
"Working with Marco gives me confidence, as I know that my legal risks are covered. His quick and risk-oriented legal advice feels less like a service and more like a partnership."
Feedback
Flurin Jenal
Founder of Stormed Inc.
"Marco knows exactly what startups need, offers his help directly, keeps everything lean, and enables fast implementation. Great!"
Desiree Pastore
Vice President, Relationship Manager at Neuberger Berman
"Marco provided me with extremely competent and timely advice on my legal questions regarding an extensive and complex employment contract. I can only recommend his legal consulting!"
Dieter Borer
Serial entrepreneur
"The ability to act quickly is essential in business. Marco enables me to do just that. I make business decisions on my own schedule, while he ensures that the associated legal risks are minimized."
Adelia Safina
Founder of UTEMPLA GmbH
"I asked Marco for help in obtaining a work permit in Switzerland. This task was almost insurmountable because I am Russian. Thanks to his excellent recommendations and his professional work, I received my work permit and can continue my journey as a startup founder!"
Daniel Koss
Founder of creable AG
"Marco advises my company competently, pragmatically, and above all immediately when a problem arises. Really top-notch advice!"
Daniel Svonava
Co-founder of Superlinked, Inc.
"As the founder of a software startup, I enjoy working with Marco because he understands how to combine thorough legal research with the context of a startup."
Marvin Sangines
Founder of notus GmbH
"Working with Marco gives me confidence, as I know that my legal risks are covered. His quick and risk-oriented legal advice feels less like a service and more like a partnership."
Let's get started!
By filling out the form, you are taking the first step towards employee participation.
Frequently Asked Questions (FAQ)
What is a convertible loan and how does it work for startups in Switzerland?
A convertible loan is a financing instrument in which an investor provides a startup with capital in the form of a loan that can be converted into equity at a later point in time. For Swiss early-stage startups, this means they can quickly and flexibly obtain financial resources without having to make an accurate company valuation immediately. The conversion usually takes place during a future funding round or another predefined event.
What is a convertible loan and how does it work for startups in Switzerland?
A convertible loan is a financing instrument in which an investor provides a startup with capital in the form of a loan that can be converted into equity at a later point in time. For Swiss early-stage startups, this means they can quickly and flexibly obtain financial resources without having to make an accurate company valuation immediately. The conversion usually takes place during a future funding round or another predefined event.
What is a convertible loan and how does it work for startups in Switzerland?
A convertible loan is a financing instrument in which an investor provides a startup with capital in the form of a loan that can be converted into equity at a later point in time. For Swiss early-stage startups, this means they can quickly and flexibly obtain financial resources without having to make an accurate company valuation immediately. The conversion usually takes place during a future funding round or another predefined event.
What advantages do convertible loans offer for Swiss startups?
Convertible loans offer Swiss startups several advantages. Firstly, they allow for quick capital acquisition, as financing can be completed faster without an immediate business valuation and with fewer formalities to consider. Secondly, they provide flexibility, as the terms can be tailored to the needs of the startup and the investor. Thirdly, they are cost-effective because the legal and administrative costs are lower compared to traditional equity financing. Additionally, they avoid immediate dilution of the founders' shares since the conversion of the loan into equity occurs at a later point in time.
What advantages do convertible loans offer for Swiss startups?
Convertible loans offer Swiss startups several advantages. Firstly, they allow for quick capital acquisition, as financing can be completed faster without an immediate business valuation and with fewer formalities to consider. Secondly, they provide flexibility, as the terms can be tailored to the needs of the startup and the investor. Thirdly, they are cost-effective because the legal and administrative costs are lower compared to traditional equity financing. Additionally, they avoid immediate dilution of the founders' shares since the conversion of the loan into equity occurs at a later point in time.
What advantages do convertible loans offer for Swiss startups?
Convertible loans offer Swiss startups several advantages. Firstly, they allow for quick capital acquisition, as financing can be completed faster without an immediate business valuation and with fewer formalities to consider. Secondly, they provide flexibility, as the terms can be tailored to the needs of the startup and the investor. Thirdly, they are cost-effective because the legal and administrative costs are lower compared to traditional equity financing. Additionally, they avoid immediate dilution of the founders' shares since the conversion of the loan into equity occurs at a later point in time.
What risks are associated with convertible loans for founders?
For founders, there are also risks associated with convertible loans. One significant risk is the potential dilution of their shares after the conversion of the loan into equity, which can lead to less control over the company. In addition, unfavorable conditions, such as high interest rates or a large discount on the company's valuation, can negatively impact the long-term chances of success for the startup. The legal complexity of such contracts can hardly be managed without professional advice.
What risks are associated with convertible loans for founders?
For founders, there are also risks associated with convertible loans. One significant risk is the potential dilution of their shares after the conversion of the loan into equity, which can lead to less control over the company. In addition, unfavorable conditions, such as high interest rates or a large discount on the company's valuation, can negatively impact the long-term chances of success for the startup. The legal complexity of such contracts can hardly be managed without professional advice.
What risks are associated with convertible loans for founders?
For founders, there are also risks associated with convertible loans. One significant risk is the potential dilution of their shares after the conversion of the loan into equity, which can lead to less control over the company. In addition, unfavorable conditions, such as high interest rates or a large discount on the company's valuation, can negatively impact the long-term chances of success for the startup. The legal complexity of such contracts can hardly be managed without professional advice.
How are convertible loans taxed in Switzerland?
The tax treatment of convertible loans in Switzerland can be advantageous but also complex and requires careful planning. Interest payments from the loan may possibly be classified as expenses for the company, while the conversion into equity can have tax consequences for both the startup and the investor. It is crucial to clarify the tax implications in advance and, if necessary, to involve a tax expert to avoid unexpected tax burdens and ensure compliance.
How are convertible loans taxed in Switzerland?
The tax treatment of convertible loans in Switzerland can be advantageous but also complex and requires careful planning. Interest payments from the loan may possibly be classified as expenses for the company, while the conversion into equity can have tax consequences for both the startup and the investor. It is crucial to clarify the tax implications in advance and, if necessary, to involve a tax expert to avoid unexpected tax burdens and ensure compliance.
How are convertible loans taxed in Switzerland?
The tax treatment of convertible loans in Switzerland can be advantageous but also complex and requires careful planning. Interest payments from the loan may possibly be classified as expenses for the company, while the conversion into equity can have tax consequences for both the startup and the investor. It is crucial to clarify the tax implications in advance and, if necessary, to involve a tax expert to avoid unexpected tax burdens and ensure compliance.
What are the typical conditions of a convertible loan in Switzerland?
Typical terms of a convertible loan in Switzerland include an annual interest rate, which often ranges between 0% and 5%. A discount on the future company valuation is common and typically ranges from 10% to 25%. Additionally, there is often a valuation cap, which sets the maximum company valuation for the conversion. The term of the loan usually ranges between 12 and 36 months. Conversion events, such as the next funding round or certain milestones, are defined to trigger the conversion of the loan into equity.
What are the typical conditions of a convertible loan in Switzerland?
Typical terms of a convertible loan in Switzerland include an annual interest rate, which often ranges between 0% and 5%. A discount on the future company valuation is common and typically ranges from 10% to 25%. Additionally, there is often a valuation cap, which sets the maximum company valuation for the conversion. The term of the loan usually ranges between 12 and 36 months. Conversion events, such as the next funding round or certain milestones, are defined to trigger the conversion of the loan into equity.
What are the typical conditions of a convertible loan in Switzerland?
Typical terms of a convertible loan in Switzerland include an annual interest rate, which often ranges between 0% and 5%. A discount on the future company valuation is common and typically ranges from 10% to 25%. Additionally, there is often a valuation cap, which sets the maximum company valuation for the conversion. The term of the loan usually ranges between 12 and 36 months. Conversion events, such as the next funding round or certain milestones, are defined to trigger the conversion of the loan into equity.
When should a startup consider a convertible loan?
A startup should consider a convertible loan when it is in an early development phase and an accurate company valuation is difficult or time-consuming. If capital is needed in the short term, a convertible loan allows for quick financing. It is also a suitable option to bridge the gap until the next major funding round. Furthermore, it makes sense when flexible terms are desired that can be tailored to the situation of the startup and the investors.
When should a startup consider a convertible loan?
A startup should consider a convertible loan when it is in an early development phase and an accurate company valuation is difficult or time-consuming. If capital is needed in the short term, a convertible loan allows for quick financing. It is also a suitable option to bridge the gap until the next major funding round. Furthermore, it makes sense when flexible terms are desired that can be tailored to the situation of the startup and the investors.
When should a startup consider a convertible loan?
A startup should consider a convertible loan when it is in an early development phase and an accurate company valuation is difficult or time-consuming. If capital is needed in the short term, a convertible loan allows for quick financing. It is also a suitable option to bridge the gap until the next major funding round. Furthermore, it makes sense when flexible terms are desired that can be tailored to the situation of the startup and the investors.
How does a convertible loan differ from a traditional equity financing?
A convertible loan differs from a classic equity financing in several ways. The investor is initially regarded as a creditor with a convertible loan and only becomes a co-owner after the loan is converted into equity. The company valuation is deferred to a later date, which is particularly advantageous in early stages. In terms of risk distribution, the convertible loan initially offers the investor more security. Additionally, the contracts for convertible loans are often less complex, which accelerates the closing of the financing deal.
How does a convertible loan differ from a traditional equity financing?
A convertible loan differs from a classic equity financing in several ways. The investor is initially regarded as a creditor with a convertible loan and only becomes a co-owner after the loan is converted into equity. The company valuation is deferred to a later date, which is particularly advantageous in early stages. In terms of risk distribution, the convertible loan initially offers the investor more security. Additionally, the contracts for convertible loans are often less complex, which accelerates the closing of the financing deal.
How does a convertible loan differ from a traditional equity financing?
A convertible loan differs from a classic equity financing in several ways. The investor is initially regarded as a creditor with a convertible loan and only becomes a co-owner after the loan is converted into equity. The company valuation is deferred to a later date, which is particularly advantageous in early stages. In terms of risk distribution, the convertible loan initially offers the investor more security. Additionally, the contracts for convertible loans are often less complex, which accelerates the closing of the financing deal.
What legal aspects must be considered for convertible loans in Switzerland?
When it comes to convertible loans in Switzerland, several legal aspects must be considered. The contractual design should be precise and contain clear definitions of terms, interest rates, and conversion conditions. It is important to comply with the provisions of Swiss corporate law, particularly regarding capital increases and shareholder rights. Additionally, agreements on information rights should be made to protect investors, ensuring transparency and trust before the conversion of the loan.
What legal aspects must be considered for convertible loans in Switzerland?
When it comes to convertible loans in Switzerland, several legal aspects must be considered. The contractual design should be precise and contain clear definitions of terms, interest rates, and conversion conditions. It is important to comply with the provisions of Swiss corporate law, particularly regarding capital increases and shareholder rights. Additionally, agreements on information rights should be made to protect investors, ensuring transparency and trust before the conversion of the loan.
What legal aspects must be considered for convertible loans in Switzerland?
When it comes to convertible loans in Switzerland, several legal aspects must be considered. The contractual design should be precise and contain clear definitions of terms, interest rates, and conversion conditions. It is important to comply with the provisions of Swiss corporate law, particularly regarding capital increases and shareholder rights. Additionally, agreements on information rights should be made to protect investors, ensuring transparency and trust before the conversion of the loan.
