# Term sheet Source: https://businessloanbroker.ai/glossary/term-sheet/ Site: BusinessLoanBroker.ai (powered by Levr) > A term sheet lists the main terms a lender is offering before the final agreement. See what a typical one contains, what is binding, and what to check. A term sheet is a short document that lists the main terms a lender is offering before the final loan agreement. It is usually one to three pages and usually not binding, so it is your best chance to compare offers and negotiate before the long contract arrives. ## Key facts - **Also called:** Offer letter, proposal letter, letter of intent, commitment letter when binding - **Where you will see it:** Term loans, SBA loans, commercial real estate, equipment financing, larger lines of credit - **Why it matters:** It is the point where you can still walk away or change the terms ## What is a term sheet? A term sheet summarizes what the lender is willing to do: how much, at what rate, for how long, secured by what, and subject to which conditions. It comes after initial review and before full [underwriting](https://businessloanbroker.ai/glossary/underwriting/) or final documents. Think of it as the lender's offer in plain form. Most term sheets say they are not a commitment to lend, and the final terms can change if underwriting finds something new. A commitment letter is the stronger version, issued after underwriting and binding on the lender once you accept and meet its conditions. Our [guide to reading a term sheet](https://businessloanbroker.ai/guides/how-to-read-a-term-sheet/) goes line by line. ## How is a term sheet used? You use it to compare offers and to settle the terms that matter before documents are drafted. A typical term sheet for a bank term loan looks like this. - Amount: $250,000. - Rate: [prime](https://businessloanbroker.ai/glossary/prime-rate/) plus 2.5%, variable. - Term: five years, monthly payments on a five year [amortization](https://businessloanbroker.ai/glossary/amortization/). - Fees: 1% origination, plus legal and filing costs. - Security: blanket lien on business assets and an unlimited personal guarantee from each owner over 20%. - Covenants: minimum DSCR of 1.25, annual financial statements within 120 days of year end. - Conditions: satisfactory underwriting, updated tax returns, proof of insurance. Everything on that list is negotiable now. Once you sign the loan agreement, almost none of it is. ## What do lenders consider normal? A normal term sheet covers amount, rate, term, repayment schedule, fees, collateral, guarantees, covenants, prepayment terms and the conditions to close. Banks and SBA lenders issue them as a matter of course. Online lenders and cash advance providers often skip the term sheet and send a contract straight away, which is itself worth noticing. It is normal for a term sheet to expire, typically within 30 days, and for a lender to ask for a deposit toward appraisal or legal costs on larger real estate deals. It is not normal to pay a fee simply to receive one. ## What should you watch for? Watch for what is missing. If the term sheet shows a payment but no [APR](https://businessloanbroker.ai/glossary/apr/) or total cost, ask. If it shows a rate but not whether it is fixed or variable, ask. If prepayment is not mentioned, assume there may be a penalty and ask for the clause. Watch the conditions, since that is where approval can quietly unwind: a term sheet subject to a satisfactory appraisal or landlord waiver can fall apart weeks later. Watch for covenants you cannot realistically keep, like a DSCR floor just above where you sit today. And keep the term sheet after closing, in case the final agreement differs. ## Related terms A term sheet is where you first see the [origination fee](https://businessloanbroker.ai/glossary/origination-fee/), the [personal guarantee](https://businessloanbroker.ai/glossary/personal-guarantee/) and any [DSCR](https://businessloanbroker.ai/glossary/dscr/) covenant together, and its conditions become your [stips](https://businessloanbroker.ai/glossary/stips/). You will see formal term sheets most on [term loans](https://businessloanbroker.ai/business-loans/term-loans/) and [commercial real estate loans](https://businessloanbroker.ai/business-loans/commercial-real-estate-loans/). You can apply here, or ask your AI assistant to compare term sheets side by side and apply for you through our [MCP server](https://businessloanbroker.ai/agents/). ## Questions and answers **Is a term sheet legally binding?** Usually not for the loan itself. Most say plainly that they are not a commitment to lend. Some clauses, like confidentiality or a deposit for third party costs, can be binding. A commitment letter is the binding version. **How long is a term sheet valid?** Typically 14 to 30 days. After that the lender can reprice, especially if rates have moved. If you need more time to compare offers, ask for an extension before it expires. **Can I use one term sheet to negotiate with another lender?** Yes, and lenders expect it. Share the key terms, not necessarily the whole document, and ask the second lender whether they can match or beat the rate, fee or guarantee terms. ## Related - [How to read a business loan term sheet](https://businessloanbroker.ai/guides/how-to-read-a-term-sheet/) - [Stips](https://businessloanbroker.ai/glossary/stips/) - [Underwriting](https://businessloanbroker.ai/glossary/underwriting/) - [What happens after you submit a business loan application](https://businessloanbroker.ai/guides/what-happens-after-you-submit/) ## Apply Apply for the business: https://apply.businessloanbroker.ai/signup?utm_source=direct&utm_medium=organic&utm_content=md-term-sheet MCP server for AI agents: https://mcp.businessloanbroker.ai/mcp (docs: https://businessloanbroker.ai/agents/mcp/)