Convertible Loan Note or Equity

[Ultraviolet]

Hello

I'm looking at putting some cash into a startup - anyone have any view on the pros / cons of a convertible loan note as against direct equity in the business?

My understanding is that the loan note would appear as a liability on the balance sheet which would be repaid as a priority by the creditors, should the business fold, if it is not converted into equity. The loan note can be converted into equity at any time. I am not sure if the loan note can be protected against dilution?

Equity would (potentially) give you dividend income (although this is unlikely in a startup) and voting rights - is this correct?

anyone have any advice on which of the above is advisable?

thanks

UV

[mikeg996]

The note should appear higher up the list of creditors.