Convertible loan agreement template Singapore
A convertible loan is money lent to your company now that turns into shares at the next funding round. FD AI drafts one from Founders Doc's own master in about 7 minutes, from the company's or the investor's side.
In FD AI: Choose Singapore, England and Wales, Hong Kong, Delaware, New York or another law.
What your convertible loan agreement covers
- Your side
- The company raising the money or the investor lending it; the usual answers lean your way.
- Amount and currency
- Singapore or US dollars, pounds, Hong Kong dollars or euros, and what the money is for.
- Interest and maturity
- Simple, compounded or interest-free, and a maturity date of one, two or three years or another period.
- Valuation cap and discount
- A pre- or post-money cap, and any discount on the round price, such as 10%, 15% or 20%.
- When it converts
- At a qualifying round, a sale or a listing, or at maturity, with an option-pool carve-out.
- Investor's choice
- Whether the loan converts automatically or only if the investor chooses, and how long they have to decide.
- Disputes
- Arbitration or the courts of the governing law.
When you need one
- When an early investor wants to back you before a priced round
- When you need bridge funding between rounds
- When you and the investor would rather not agree a valuation yet
- When an existing shareholder lends money that may turn into shares
How it works
- Answer a few questionsPlain English, one at a time. Skip anything you are unsure of.
- FD AI drafts your convertible loan agreementFrom Founders Doc's own lawyer-written wording, shaped around your answers.
- Check, edit and downloadChange any wording, ask FD AI to explain a clause, then download it as Word.
Common questions
Is a convertible loan the same as a SAFE?
No. A convertible loan is a debt: it usually earns interest and has a date by which it must convert or be repaid. A SAFE is not a loan, has no interest or repayment date, and simply turns into shares at the next round.
Do our shareholders need to approve the conversion shares?
Yes. Converting means the company issues new shares, and in Singapore directors need the shareholders' prior approval to do that. Many companies get the approval when the loan is signed, so conversion is not held up later.
What if we have not raised a round by the maturity date?
It depends on the agreement. Usual options are repaying with interest, extending the date or converting at an agreed valuation, often the cap. Decide this before you sign.
How does the conversion work? A worked example
Say an investor lends S$100,000 with a 20% discount, and the next round prices shares at S$1.00. The conversion price is S$0.80, so the loan turns into 125,000 shares, before any interest. With a valuation cap, the investor gets whichever price is lower: the discounted price or the cap price.
Can we raise a convertible loan from the public?
Not freely. An offer of convertible loans is an offer of securities, so a prospectus is needed unless an exemption applies, such as small offers, private placements or offers to accredited investors. Most start-ups raise from a few known investors under one of these.
Do the moneylending rules apply?
A company borrowing from its investors is not usually a moneylending business, but the position depends on the facts. Speak to a Founders Doc lawyer if the lender lends to others as a business.
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This page is general information, not legal advice. Every deal is different — for advice on your situation, talk to a Founders Doc lawyer.