Financial instruments which evidence the existence of a debt between a borrower (issuer) and one or more lenders (noteholder(s)) and the promise by the issuer to repay the amounts outstanding under the loan notes to the noteholder(s). Also commonly known as loan stock, loan notes constitute a particular type of debt security called debentures.

Loan notes can be issued by corporate entities as well as individuals for a number of different purposes. For a standard instrument constituting general purpose loan notes, see Standard document, Loan note instrument.

In the context of a private equity transaction, an investor will often subscribe the majority of its investment for loan notes (also known as equity investor loans) alongside its much smaller equity investment.

Subject to the satisfaction of certain conditions, consideration loan notes (often known as vendor loan notes) can also be a useful method of enabling a selling shareholder to defer any liability to capital gains tax (or corporation tax on chargeable gains) in respect of any gain arising on the share disposal (see Standard document, Loan note instrument (share consideration) and Drafting note, Tax considerations).

In the context of venture capital financing, convertible loan notes are typically issued by a company as a short-term bridge facility ahead of a first round of venture capital investment. Convertible loan notes represent a right to subscribe for, or convert the loan note into, shares in the issuing company and so will generally be unsecured. For a standard document convertible loan note instrument, see Standard document, Convertible loan note instrument.