Glossary
Term sheet
A written summary of the proposed loan terms, issued before full documentation. Usually not binding on the lender, and the point at which you still have negotiating leverage.
Term sheet: A written summary of the proposed loan terms, issued before full documentation. Usually not binding on the lender, and the point at which you still have negotiating leverage.
Why it matters
The term sheet is where the deal is actually decided. Once you accept it and the lender orders appraisals and begins formal underwriting, your leverage drops sharply — you have sunk time and often real money, and you are unlikely to restart elsewhere.
Negotiate at term sheet stage or not at all.
What to check, in order
- The amount and the net proceeds. What arrives after fees, not the headline figure.
- Rate, and whether fixed or variable. If variable, what index and what margin — see prime rate.
- Term and amortization. If they differ, there is a balloon.
- Every fee in dollars, including those payable if the loan does not close.
- Collateral. Specific assets or a blanket lien?
- Personal guarantees — who, and joint and several?
- Covenants, and whether you would have passed them over the last two years.
- Prepayment terms.
- Conditions precedent — what must be true before funding.
- Expiry, and the timetable to closing.
What is usually negotiable
More than borrowers assume, and rate is often the least movable item on the list.
| Often negotiable | Rarely negotiable |
|---|---|
| Covenant levels and cure periods | The rate, on an SBA loan at the cap |
| Collateral carve-outs | SBA program rules |
| Guarantee caps, occasionally | The guaranty fee |
| Prepayment terms | Required equity injection minimums |
| Reporting frequency | Whether a guarantee is required at all |
| Fees, sometimes |
Before you sign
Get a second term sheet if you can. The single most effective negotiating position in small business lending is a genuine alternative, and our lender rankings are built to help you find lenders whose actual book matches your loan rather than lenders who merely advertise.