In one sentence
A non-binding summary of proposed loan terms, issued early to align the lender and borrower on structure before the expense of full documentation.
The longer version
A term sheet lays out the loan amount, rate, term, amortization, key covenants, and conditions, usually with explicit language that it binds no one. It exists to surface disagreements cheaply, before counsel and third-party reports run up cost.
Once signed, the term sheet becomes the reference the closing checklist is built against. The conditions listed here become the earliest version of the request list.
Common questions
- What is a term sheet in commercial lending?
- A non-binding summary of proposed loan terms, such as amount, rate, term, amortization, recourse and key conditions, issued early to align lender and borrower before diligence spending begins.
- Is a term sheet binding?
- Usually not, apart from specific provisions such as deposits, expense reimbursement, confidentiality or exclusivity. The binding commitment comes later, in a commitment letter or the loan documents.
- What is the difference between a term sheet and a commitment letter?
- A term sheet proposes terms. A commitment letter commits the lender to fund on stated terms subject to conditions, usually after underwriting and credit approval.
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