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Term sheet
Also called offer letter, letter of intent, proposal letter, LOI.
A summary of proposed terms issued before contract documents, mostly non-binding as to the financing itself but frequently binding as to a handful of clauses buried in it.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
It sets out the headline economics — amount, price, term, payment frequency, collateral, guarantees — and the conditions that must be satisfied before closing. It is a negotiating document and a statement of intent, and it is normally expressed as not obliging either side to complete.
The exceptions matter. Exclusivity or no-shop provisions bind the borrower not to negotiate with other lenders for a period. Expense deposits and good-faith deposits are real money, often stated as non-refundable or refundable only against actual costs incurred. Confidentiality clauses bind. Read those three categories as if they were the contract, because they are.
The terms change between the sheet and the closing documents more often than not, because underwriting is still running. Collateral requirements harden, guarantee scope widens, covenants appear that were never mentioned, and pricing moves where the file came in weaker than the application suggested.
Where this one catches people
A signed term sheet plus a deposit is where money disappears in this market. The pattern: an attractive quote, a due diligence or commitment deposit, then weeks of document requests, then a materially worse final offer or no offer at all — with the deposit already spent against "costs". Before sending a deposit, establish in writing what it is for, what triggers a refund, and who holds it. A funder confident in its file will usually explain that without hesitation.
Where you will meet this term
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Term sheet — common questions
What does term sheet mean?
A summary of proposed terms issued before contract documents, mostly non-binding as to the financing itself but frequently binding as to a handful of clauses buried in it.
Where does term sheet catch people out?
A signed term sheet plus a deposit is where money disappears in this market. The pattern: an attractive quote, a due diligence or commitment deposit, then weeks of document requests, then a materially worse final offer or no offer at all — with the deposit already spent against "costs". Before sending a deposit, establish in writing what it is for, what triggers a refund, and who holds it. A funder confident in its file will usually explain that without hesitation.
Is term sheet the same as an interest rate?
Term sheet is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does term sheet apply to?
Term Loan, Business Line of Credit, SBA Loan, Invoice Financing, Asset-Based Lending.
Is there a worked example of term sheet?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside term sheet?
Commitment letter, Origination fee, Stips, Underwriting.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.