term sheet template PDF Template

[toc] Term sheets are papers used to write out the beginning terms of a finance growth endeavor or potential investment offering. It traditionally is not a binding contract, but it merely serves as a vehicle to highlight conditions of the investment. These documents may eventually lead to a fully realized contract.

Term sheet documents are letters that spell out intentions or a form of a letter of intent. American Bar states that an intention letter is to begin negotiating the terms of the agreement. The conditions being suggested in the template are only preliminary and typically, they are non-binding.

The term sheet is used to break down the desired conditions in a step-by-step or bulleted fashion. The outline is an easy way to write up proposals with highlights or points of concern for each party. The terms are not covered in-depth at this point in the negotiations. Using the sheet will help each party decide faster if this is an opportunity to pursue further or the highlighted points will quickly close the lines of communications.

There is no need to write out full disclosures while using the term sheet. Normally this document is not a legal contract, and no portion of it is meant to be a binding agreement. The setup of a term sheet may make it clear that the recommendations are just proposals. The product is used to save time and open dialogue between companies and individuals about possible financial opportunities.

[pdf-embedder url=”https://cdn-prod-pdfsimpli-wpcontent.azureedge.net/pdfseoforms/pdf-20180219t134432z-001/pdf/term-sheet-template.pdf”]Some groups that would use the term sheet document are venture investors or startups. Start Ups explains this type of business is a concept that someone is trying to take to full fruition. These types of companies most often need cash to bring their ideas or products to the public. They need to attract financing, and one of the vehicles that they can use is a term sheet.

People they can present the term sheets to are angel investors. Angel investors use their own funds to back these up and coming businesses. Venture capitalist may also see the documents. Venture capitalist will review the term sheet just as the other investors will, and just like many of the angel investors, the venture capitalist investors are spending money of a company, product, or idea that is not fully developed. These types of investments are risky, and they require knowledge. Well-prepared term sheets give the potential investors something to work with. It will help them to evaluate the risk and rewards.

Other people or organizations that can use the document are:

Self-employed entrepreneurs

Schools or universities

Not-for-profits

Businesses

Institutions

A term sheet PDF should be used when a company has either an actual item or a viable prototype. The concept should be developed or have models. They may have a completely developed working product but there might be supplier issues.

The term sheet should be presented when the company or idea is considered sturdy, strong, and viable. At Entrepreneur they graph out a healthy company as being established with a specific niche or audience, and they should have a value proposition with room for improvement and new growth. Investors like to see ideas or companies that can expand or grow quickly. Of course, low risk is a benefit, but often companies presenting term sheets are riskier and not looking towards traditional financing, and the people receiving the sheets are looking to earn a profit, and the terms will help them decide if the risk is worth the possible payoff.

The consequence for not using a term sheet is not having an outline form to present to the potential investors. Without a highlighted bullet point presentation or a broken down term document most investors will not consider the company for financing. The investors are used to dealing with the documents and expect to see the proposals come into them in that format.

If a company does not use a term sheet, they may leave out important features such as dividends. Dividends, as explained by Investopedia, are extremely important to some investors. Dividends are the payout the investor will receive on a prearranged schedule. Other items covered are commission fees and voting rights. Voting rights gives the investor a say in the company, and that could be a feature they absolutely must have in order to proceed with negotiations, and if that is not explained because a term sheet was not used, money could be left behind.

An individual or company filling out the template will need several figures and access to records. Some of the terms and conditions to notate are:

The issuers name, company, or corporation

Offering size

Capitalization

Commissions

Dividends

Voting rights

Closing conditions

Closing date