Glossary
Term sheet
Also called: indicative terms, heads of terms
A term sheet is a summary of the main terms a lender proposes for a loan, including the amount, term, interest, fees, security and conditions. It is usually indicative and not binding until formal loan documents are signed.
An example
After an initial conversation, a lender sends a borrower a term sheet setting out the proposed facility, the fees, the valuation and legal requirements and the conditions that must be met before funds are released.
Why it matters
The term sheet stage is when to clarify every cost and condition. Comparing term sheets line by line, including default interest, extension terms and exit fees, gives a clearer picture than comparing headline rates.
Points to check
Read the term sheet carefully and ask for clarification of anything unclear before paying any fee. Check what is binding and what is indicative, and the conditions that must be met before formal documents are issued. Compare term sheets from different lenders on the same basis, using the term sheet comparison checklist. Be cautious of lenders asking for large fees before issuing a term sheet.
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