Maturity Date

What is the maturity date?

Maturity date (in German: Fälligkeitstag, also Fälligkeitsdatum or Laufzeitende) describes the day specified in the loan agreement on which the term ends and the claim for repayment falls due. For a convertible loan, it is the point in time for which the contract determines a consequence if neither a funding round nor any other conversion event has occurred by then. Possible consequences are repayment, conversion at a valuation fixed in advance, or extension.

The due date is stated in the contract for a convertible loan and supplements the other conversion events (conversion triggers). For the company and its management, it is a variable in liquidity planning; for the lenders, it is the point in time at which they can demand repayment or conversion or negotiate an extension. The US-style SAFE, by contrast, has no due date. Outside startup financing, the term also means the repayment date of a bond, a fixed-term deposit or a bank loan. For real estate loans, it must be distinguished from the end of the fixed-interest period, after which a remaining balance is often refinanced.

Provisions for the maturity date of a convertible loan

• Repayment: The loan and accrued interest fall due. If the lender has agreed a qualified subordination (Rangrücktritt), that is, accepted that the other creditors rank ahead, payment may be made only to the extent that it does not cause illiquidity or over-indebtedness.
• Fallback conversion: The loan converts at a valuation fixed in advance, often at the valuation cap (valuation cap) or below. It can be designed as an obligation or as an option of the lender.
• Extension: by agreement, by resolution of a majority of the lenders or as a unilateral right of the company, often only once and for a limited period.
• Combinations: A lender's option between repayment and conversion is common.

The variant chosen distributes negotiating power at the end of the term. If the lender has only a repayment claim that the company cannot meet, the lender gains weight in any renegotiation. A mandatory conversion at a fixed valuation removes this pressure, but shifts the negotiation to the level of that valuation, which then has to be fixed when the contract is signed.

Setting the term up to the maturity date

In practice, the terms of convertible loans are often 12 to 24 months. The term depends on how long it realistically takes until the next round. This includes the time to the milestones that investors want to see, the duration of the financing process itself and a reserve for delays. The due date therefore belongs in liquidity planning and must fit the company's runway.

Formula: Maturity date = start of the term + agreed term; repayment amount at the maturity date = loan amount × (1 + interest rate × term in years), with simple interest and no compound interest

Before the end of the term, the loan can usually be terminated only for good cause. Whether the lender's statutory right of termination in the event of a material deterioration of financial circumstances (Section 490(1) of the German Civil Code, BGB) is excluded is a common negotiating point. For growth companies, such a deterioration can occur precisely in the phase before a round.

Due date and insolvency law

The due date of a loan is not in itself a ground for insolvency. What matters is illiquidity under Section 17 of the German Insolvency Code (InsO), that is, the inability to meet payment obligations as they fall due, and over-indebtedness under Section 19 InsO. A due repayment claim that the company cannot meet can, however, contribute to illiquidity. If a ground for insolvency exists, the management must file for insolvency without culpable delay. The deadline is at most three weeks after illiquidity occurs and six weeks after over-indebtedness occurs (Section 15a(1) InsO).

A qualified subordination that already applies before an insolvency changes this position. The lender may not demand repayment as long as and to the extent that it would cause illiquidity or over-indebtedness. This prevents a payment obligation at an inopportune time, but does not replace planning, because the claim continues to exist. How a specific due date is to be assessed under insolvency law depends on the wording of the contract and the liquidity position.

Extending the maturity date and renegotiation

If it becomes apparent that the round will not be completed before the due date, an extension is often agreed in practice. Lenders often demand concessions for this, such as a lower valuation cap, a higher discount or a higher interest rate. With several lenders, it matters whether the contract allows majority decisions or each individual lender must consent. Different due dates of several loans make negotiation harder, because each deadline triggers its own discussions. If other financings contain a cross-default clause, non-payment of one loan can trigger termination rights there, although those loans are themselves being serviced properly.

Worked example: calculating the amount and options at the maturity date

A GmbH has 50,000 shares on a fully diluted basis. A convertible loan of EUR 750,000 with 4% interest per year without compound interest falls due after 24 months. The valuation cap is EUR 7.5 million pre-round, the discount 20%. For the end of the term, the lender has the choice between repayment and conversion at a valuation of EUR 5 million. On the due date, the company has EUR 1.2 million of liquid funds with a monthly net cash outflow (net burn), that is, expenses less income, of EUR 150,000.

• Amount on the due date: 750,000 + 750,000 × 4% × 2 = EUR 810,000
• Runway before repayment: 1,200,000 / 150,000 = 8 months; after repayment: (1,200,000 minus 810,000) / 150,000 = 2.6 months
• Fallback conversion: price 5,000,000 / 50,000 = EUR 100; conversion shares 810,000 / 100 = 8,100; stake 8,100 / 58,100 = around 13.94%
• Extension by twelve months in return for lowering the cap to EUR 6 million: amount after 36 months 750,000 + 750,000 × 4% × 3 = EUR 840,000
• Series A after the extension at EUR 200 per share: discount price 200 × 0.8 = EUR 160, cap price 6,000,000 / 50,000 = EUR 120; conversion shares 840,000 / 120 = 7,000
• Without lowering the cap: cap price 7,500,000 / 50,000 = EUR 150, conversion shares 840,000 / 150 = 5,600; the extension thus costs the other shareholders 1,400 additional conversion shares

The calculation shows why repayment is rarely a realistic option for a growth company: it shortens the runway of the liquid funds from eight to 2.6 months. Whether it can be demanded at all where a subordination has been agreed depends on whether it would cause illiquidity or over-indebtedness. Negotiation therefore centres primarily on the price of conversion or extension.

Distinctions: maturity date, termination, repayment and drop-dead date

• Conversion trigger: the entirety of the events on which conversion takes place. The due date is one of them only if the contract orders conversion for that point in time.
• Drop-dead date: the cut-off date in a company purchase agreement by which closing must have taken place, failing which rights of withdrawal arise. It shares with the term of a loan only the fixed date.
• Termination: the early ending of the loan by a party, for example for good cause. The due date, by contrast, occurs through the mere passage of time.
• Repayment: the scheduled return of a loan in instalments, as is usual with bank loans and venture debt. Convertible loans, by contrast, are usually bullet loans without ongoing repayment.

Common mistakes

• Term too short. If the term is shorter than the milestone phase and the financing process combined, an extension becomes almost unavoidable, and the company's negotiating position deteriorates.
• Only repayment provided for. If there is no conversion or extension rule, a repayment claim stands on the due date that a growth company can hardly meet.
• Fallback valuation left open. If the valuation for conversion at the end of the term is not quantified or not related to a share basis, it has to be negotiated under time pressure.
• Due date not in the liquidity plan. If the date is not planned with its consequences, the need for action becomes apparent too late for an orderly negotiation.
• Subordination without a block before insolvency. A subordination that takes effect only in insolvency proceedings does not prevent the lender from asserting repayment beforehand.
• Uncoordinated due dates. Several loans with different due dates lead to repeated individual negotiations.

Frequently asked questions

Does a convertible loan have to be repaid at the end of the term?

Not necessarily. That depends on what the contract provides for the end of the term; many contracts provide for conversion at a fixed valuation or an extension. A qualified subordination excludes repayment to the extent that it would cause illiquidity or over-indebtedness.

Is the due date of a convertible loan a ground for insolvency?

No, not in itself. Grounds for insolvency are illiquidity and over-indebtedness. A due claim that cannot be met can, however, contribute to illiquidity, unless a qualified subordination blocks its enforcement.

How is the maturity date calculated?

From the start of the term and its duration, unless the contract names a fixed date. If the term begins with disbursement on 15 March 2026 and lasts 24 months, the loan falls due on 15 March 2028. If the day falls on a Saturday, Sunday or public holiday, the next working day takes its place under Section 193 BGB.

Can the company extend the term unilaterally?

Only if the contract grants it this right. Otherwise an agreement with the lenders is needed, with the agreed majority if the contract contains a corresponding clause.

How long is a typical term?

Usually one to two years. The yardstick, however, is not market practice but the realistic time until the next round, including a reserve.

The Roemer Capital view

We enter the due dates of convertible loans, with the consequences of each contractual variant, in liquidity planning, whether in preparing a round or as a fractional CFO. A financing process should begin with a runway of 12 to 18 months of liquid funds. If a due date lies within this period, the question of extension or conversion belongs on the agenda before the first investor conversations take place.

The assessment of a due date under insolvency law remains a matter for the management and its legal advisers. Our contribution is to ensure that the figures for this assessment are available in good time and in a traceable form.