Matching Convertible Loan

This subpage and documents are an information translation of the Icelandic version for informational purposes.
In case of any discrepancy between the English and the Icelandic versions, the Icelandic versions prevails. 

The New Business Venture Fund coordinates the implementation of matching convertible loans, which are part of the Government‘s actions in support of start-up and innovation companies. The measure involves the provision of matching convertible loans against contribution of investors.


Matching convertible loans are part of the government‘s economic measures to meet the negative economic impact of the COVID-19 pandemic. The Government‘s action is particularly focused on promoting innovation and support operational start-ups and innovative companies.

More about the purpose of the loans
Considerable disruption to the operations of start-ups and innovative companies has occured lately, as in many other sectors  of the economy.  Presently there are many examples of start-ups and innovation companies now facing problems that can be directly attributed to their reduced ability to obtain operational financing due to  COVID-19. The problems of start-ups  are to some extent different from other companies and  can be  divided into two main groups.

On one hand, there are companies that are still in the design and development phase and have not started to generate income, and are now facing  uncertainty about funding due to changed circumstances in the economy. In this context are for example companies that have been been trying to secure financing for a long period of time, and are being told by investors that they will defer  further investment decisions  whilst he effects of the coronavirus continue.

On the other hand, there are companies that have started sales and marketing but may still have negative cash flow. Such companies rely on rapid income growth to meet the need for capital, but the preconditions for such a growth are in many instances effected, at least temporarily, due to Covid-19. Customers turn down sales visits, companies and individuals hold back and revenue generation is delayed. Disruption of estimated revenue growth could impact these start-ups heavily, putting increasing pressure on new funding and might put the future of the companies at risk for reasons beyond their control.

The scheme will help these companies through the current period of economic disruption and the recovery, so they are able to continue their growth trajectory and reach their full economic potential.

To that end, the government has decided to offer to  companies matching contributions in cooperation with investors, but this action also provides important support for the investment environment in Iceland, which the government will support in the coming years with the aim of creating an internationally competitive financing environment for start-ups and innovative companies.

Terms of the loans

Matching convertible loan will be in the form of bonds with convertible rights in share capital and granted short term. It is generally assumed that the terms of matching convertible loans such as interest rates, loan terms, conversion rights and other terms will be the same as the investor is willing to provide to the company.

The loans shall, however, have at least the following terms:

  • Interest rates are not lower than 10%

  • The loan period is not longer than 36 months

  • Loan amount is between 25 to 70 million ISK. *)

If the investor has provided the company with financing from 1st March 2020 in the form of a share capital, the minimum terms shall apply for matching convertible loan to the company.

*) If the demand  for matching convertible loans is greater than the budget on which the amount is based, the loan amount of each matching convertible loan will decrease proportionally (pro rata).

Terms and conditions

The main precondition of the matching convertible loan is that the investor is ready to provide the company with financing, and it is assumed that the loan amount and terms of the matching convertible loan will be the same as the investor is ready to provide the company. This ensures that the matching convertible loan will be granted on market terms, but will stipulate certain minimum terms on which matching convertible loans will be granted, if private financing turns out to be on particularly favourable terms that do not reflect market conditions. The matching convertible loans will not be available to those companies that cannot raise capital from an investor on the basis of a matching convertible loan.

Details on the conditions for application

Matching convertible loans will only be granted if the following conditions are met:

  1. That a satisfactory application has been submitted on the application form, within the advertised application deadline, which is from 16. July to 13. August 2020.
  2. That the application is supported by the specified data.
  3. That the applicant is a company engaged in independent business activity and is subject to full and unlimitied tax liability within the meaning of Act no. 90/2003 on income tax in Iceland.
  4. That the applicant has less than 50 positions from1st of March 2020 and an annual turnover of less than ISK 500 million in 2019.
  5. That the applicant demonstrates that the company has in the years 2018, 2019 and/or 2020 secured financing in the form of share capital or loan amounting at least 40 million ISK.
  6. That the applicant has not been listed on a regulated securities market or financial instruments marketplace (MTF).
  7. That  the the applicant has received confirmation from Rannís in the year 2019, or received a grant from the Technology Development Fund in the years 2017 to 2020.
  8. That the applicant has not, from the 1st of March 2020, paid dividends, unpaid bonuses, purchased own shares, paid off a subordinated loan before maturity or provided the applicant‘s owners or close parties with loans or other payments that are not necessary to maintain operations. The application form signed by the applicant contains a statement that the above conditions are met.
  9. That the applicant has a clean debt certificate from the Tax authority in Iceland, i.e. any default of payment of public taxes and fees is not permitted and any default of payments with a credit institution for longer than 90 days is prohibited. In the application form the applicant signs a statement that these aforementioned conditions are met.
  10. That the applicant has, as of 1st of March 2020, secured financing in the form of loans or share capital for at least the same amount as the matching convertible loan applied for.  If financing is in the form of a loan, a matching convertible loan shall be granted on the same terms with regards to interest rates and loan periods, and is basically subject to the same terms as matching convertible loan. If the loan is financed in the form of a bond, that financing shall be in the form of a convertible bond.  Investment promises shall not be subject to any other conditions than the approval of an application for a matching convertible loan.
  11. After the applicant has been notified of the approval of the application, but before granting the matching convertible loan, the applicant shall demonstrate, in a sufficient manner that the following has taken place within 4 weeks of receipt of the application approval:
    1. That the applicant demonstrates that the applicant‘s shareholders‘ meeting has agreed to issue convertible bonds and to amend it articles of association.
    2. That the applicant demonstrates that the relevant amendments to its articles of association have been registered with the company registry in Iceland and as the case may be a share capital increase due to the investor‘s share capital contribution,
    3. That the applicant demonstrates that the company has received funding from an investor which is at least the same amount as the matching convertible loan applied for.

Application process and time frame

Application period for a matching convertible loan is from 16. July to 10. September 2020.

The applications with the necessary attached documents must be sent to the e-mail address

Further information:

Application form
Investor statement
Form for investor loan (PDF)
Form for investor loan (Word)
Form of minutes of a shareholders’ meeting