Term sheet

Definition

A lender's written but non-binding summary of the loan it expects.

Why It Matters

Holding two or three at once is the only real bargaining power a first-time borrower has. Competing offers rarely disagree on just one number, which is what makes them hard to compare in your head. Read past the rate to the fees, the term, the covenants, and what the lender still has to confirm. A quarter point is worth far less than a year of amortization or a covenant you will breach in month eight. Nothing here is binding, so treat it as the lender's opening position rather than a decision.

In numbers: A lender's term sheet on a $1,100,000 loan might read: 10 years, prime plus 2.75%, a 10% injection with half allowed as a standby seller note, and a lien on business assets. None of it is a commitment yet; it is the shape the commitment will take if underwriting agrees.