Funding (Capital Raise) Term Sheet (Word DOCX)

A Term Sheet is a Lender's formal expression of interest making a loan. It sets out the commercial terms and conditions pursuant to which the Lender has agreed to provide a loan facility to a Borrower.

A Term Sheet will come into play if an entity has pitched for finance and have investors (or Lenders) lined up. The next step will likely be that the Borrower is presented with a ‘term sheet' by the Lender. A Term Sheet is simply a list of the terms on which a lender is prepared to offer funding.

However, it is not a legally binding contract. The Term Sheet essentially lays the groundwork for ensuring that the parties involved in a business transaction agree on most major aspects, thus avoiding major misunderstandings or disagreements.

Term Sheets are usually signed before money is exchanged and this document sets out all of the details about how money will be paid out to the Borrower, as well as any rights and obligations that each party has.

Terms can vary greatly but generally a Term Sheet will include a summary of key loan terms such as:

a. The amount the Lender is prepared to lend or the facility amount.
b. Any fees the Lender will charge the borrower to complete or service the loan.
c. The interest rate, including if it will be a fixed rate or floating.
d. The purpose of the loan.
e. What sort of security the Lender will take in the Borrower's property.
f. The conditions precedent, which are the specific conditions that have to be met before the loan will take effect.
g. Certain obligations your business must abide by throughout the life of the loan called covenants.
h. Circumstances that qualify as events of default.
i. The terms of any potential exit.
j. The governing law of the loan agreement amongst other factors.