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For investors, Convertible Notes are a way of earning a yield, taking a position that may give them security ranking above equity holders whilst having equity upside. Even though the terms of notes can be different, generally, it gives an investor the ability to make a decision to convert or redeem at the end of the term.
Some information on convertible notes
Using a convertible note as a financing option offers several benefits for companies. Firstly, it provides flexibility in raising capital without the immediate need to determine the company’s valuation. Additionally, the simplified terms of convertible notes streamline the negotiation process, making it faster and more efficient compared to equity financing. This allows the company to secure funding more quickly and focus on its growth and development.
The potential conversion of the debt into equity provides an opportunity for investors to become long-term stakeholders in the company, aligning their interests with the company’s success.