Commitment letter

Definition

The bank's written offer to lend, with the conditions it will lend on.

Why It Matters

It is not the same document as the SBA authorization, and the difference matters whenever a closing date is at stake. The commitment letter is the bank's own offer, and it is where the conditions live: the injection it expects, the collateral it wants, the life insurance assignment, the landlord agreements it needs signed, and the date the whole thing expires. Read the conditions before the rate. A term sheet with a rate you like and a condition you cannot satisfy is not financing, and finding that out late costs a closing.

In numbers: A commitment that expires in 45 days with a 10% injection condition on a $1.5M deal means $150,000 has to be seasoned and documented before it lapses.