Convertible Loan Note Calculator 2025/26

A convertible loan note (CLN) is a short-term debt instrument that converts into equity shares at a future funding round, rather than being repaid in cash. The investor lends money to the company, which accrues interest. At the next equity round, the loan (plus interest) converts into shares, usually at a discount to the round price (reflecting the early investor's risk). CLNs are popular for bridge financing because they defer the question of valuation until a priced round.

A valuation cap sets a maximum company valuation at which the CLN converts into equity. If the company's next round valuation exceeds the cap, the CLN holder converts at the cap valuation (not the actual round valuation), giving them more shares per pound invested. For example: £200,000 CLN with a £2M cap; company raises at £5M valuation; CLN holder converts at £2M effective valuation — giving significantly more shares than at £5M. Caps protect early investors in high-growth companies.

No — convertible loan notes do not qualify for SEIS or EIS income tax relief. SEIS and EIS relief requires shares to be issued to the investor at the time of investment, not at a future conversion. If tax relief is important to the investor, consider an advanced subscription agreement (ASA) or direct equity investment instead. ASAs can qualify for SEIS/EIS if structured correctly and shares are issued within a reasonable timeframe. Always take specialist tax advice before structuring early-stage investment.