Convertible Loan Notes: The New Form Of Financing?

There are many ways that companies can acquire financing for projects.

These includes the simple loans, mortgages, flotation on the stock market and bonds.

However, a new way to finance business operations could be through convertible loan notes. These are different from the straight forward loan that you might find in a home loan or car loan deal.

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The financial institutions that back the convertible loan notes can exchange them for stock in the company.

Today in The Gold Prices Newsletter and article showed how mining companies were using convertible loan notes to financing their projects:

“Norseman [Norseman Gold Plc] were unable to raise equity finance in Australia but were able to secure A$20 million of 7% Convertible Loan Notes from Macquarie, an Australian bank. So these notes act as an alternative form of finance when bank funding is unavailable. It would appear to be a win-win situation as it has given Norseman the finance necessary to proceed without actually having to go the shareholders to raise cash.”

Do you think convertible loan notes will catch on as a way of financing?

Or will simple loans, mortgages, bonds and raising money via the stock market remain the main way companies raise cash?

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