MaturityThis sets out the date of which the loan amount and interest gained is due. The usual terms of this is 3-5 years from signing of terms. Qualifying funding roundConvertible loan notes are set to automatically convert when a specific target amount is raised within an agreed time limit.  DefaultIf the loan defaulted, interest accrued not paid or another breach of stipulations, this will trigger what is called an event of default. You may lose equity or control of business so it’s critical that debt is satisfied and terms are met to the satisfaction of note holder.Principal and interestThe convertible loan note is usually calculated using simple interest. Sometimes compound interest can be used, depending on agreement set out between business, owner and investor. The principal amount is due on the maturity date and interest accruing is payable yearly, monthly or quarterly. Furthermore, interest can be payable on the maturity date even alongside the principal if those are the terms agreed. Discount rateThe terms of a convertible loan note usually include a share price discount, offering the CLN holder shares at a lower rate than other investors. Usually the discount is around 20%, although it can vary from 15-25%, making it an attractive proposition for investors who are confident that the expansion of your business will be a success. It is worth remembering, however, that the higher proportion of new shares raised are owned by investors with a discounted rate, the less capital you will have available. Valuation capA valuation cap sets a ceiling on the conversion price of the convertible loan note so the note bearer is guaranteed a minimum number of shares if, at the next equity funding round, the share price is above the valuation cap. The cap is there to protect the investor but bear in mind the new investors might think twice about investing at a much higher price than the holders of your notes and might ask them to revisit terms.