It's a starting point, not a promise
A term sheet is a lender's initial offer, subject to underwriting, appraisal, title and final approval. It is not a commitment to fund. Treat it as a negotiating document: the numbers can and do move once diligence begins.
The core numbers
Every term sheet centers on a handful of numbers that determine how much you can borrow and what it will cost.
- Loan amount and loan-to-cost (LTC) or loan-to-value (LTV)
- Interest rate and whether it is fixed, floating, or indexed to a benchmark
- Term and any extension options
- Origination fee (points) and exit fee
- Interest reserve, if the loan is funding its own carrying costs
Conditions that can change the deal
Look past the headline rate to the conditions section: recourse requirements, minimum liquidity or net worth covenants, guarantor requirements, and any conditions precedent to closing (like a signed GC contract or fully executed leases).
Questions to ask before you sign
Before accepting a term sheet, confirm what is refundable if the deal doesn't close, how long rate locks hold, and what triggers a re-trade.
- Is the deposit refundable, and under what conditions?
- What can cause the rate or leverage to change before closing?
- Who owns third-party reports (appraisal, PCA) if you switch lenders?
Why a broker helps here
We review term sheets against multiple lenders' typical paper before you sign anything, so you know whether the terms in front of you are competitive or whether a better structure exists elsewhere.