Reading time: 3 minutes

Do you need funds for your new or growing business? Do you have an innovative idea, but you are pre-revenue, so no ability to repay a debt? What would you like to do with the funds? How will you use them for your business? Can you sell your idea to an investor?

We’re often asked for help with financing a business. We suggest five key paths as follows:

  1. Loans;
  2. Grants;
  3. Convertible Notes;
  4. Equity funding; and
  5. Crowdfunding.

This article is one of a 5-part series on how to finance your business. This article focuses on convertible notes.

Convertible Notes

A convertible note is a promissory note or a written promise that is issued to your investors. The investors provide you with capital, and in return they receive a certain number of shares once a trigger event occurs. This can be when your business raises a certain amount of money, at which point the investor receives the agreed amount of shares at a discounted rate.

The main advantages are:

  • Using a convertible note means you can delay valuing your business and your shares until your company is more established. This is a significant advantage, as businesses can be hard to value at the start, and will typically have a low value.
  • You are not issuing equity too early, which helps you to maintain your control of the company. It is also often easier, cheaper and faster to issue a convertible note rather than go through the legal and practical hoops for an issue of shares. 

The main disadvantage is that it can be difficult to get investors interested in taking a convertible note instead of shares, as they may have more rights as a shareholder and are generally keen to maximise their equity.

One way to counter this is by including a ‘valuation cap’ that sets a maximum value for the company that will be used when the note is triggered. This effectively means that if your business is valued higher than the valuation cap, i.e. the investors will receive more shares for a cheaper price. However, this could be more detrimental to your company than if you had originally issued shares in the first place.


Is a convertible note right for you? It may be an excellent option to bring in investors without giving away equity. The terms of the convertible note are imperative. You will benefit from the advice in putting your proposal together and negotiating your convertible note agreement. LegalVision can help create or review your convertible note, so you fully understand the terms and are in as strong a position as possible.

Can LegalVision assist you with your convertible note? LegalVision provides businesses and individuals with tailored online legal advice, including drafting legal agreements like convertible notes. We have experienced finance lawyers who will help protect you. Call LegalVision on 1300 544 755.


Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards