Before establishing an agreement with a representative or an investor, you have to outline first the terms and conditions of the investment agreement or deal. You can use a template to take note of important details as a part of your business plan which you can eventually turn into a legally binding contract or document. This template is called the term sheet template which is used by startup businesses or small businesses that need more investment to start or expand their business operations.

10+ Term Sheet Samples

1. Term Sheet Template

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2. Sample Term Sheet

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3. Preparing Term Sheet

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4. Term Sheet Example

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5. Term Sheet Agreement

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6. Non Binding Term Sheet

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7. Transaction Term Sheet Sample

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8. Drafting Term Sheet

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9. Indicative Direct Guarantee Term Sheet

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10. Joint Venture Term Sheet

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11. Early Stage Term Sheet

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What is a Term Sheet Template?

A term sheet template is a nonbinding document or agreement that outlines the basic terms and conditions of an investment made by two parties. This document is used to attract investors like venture capitalists with capital to fund businesses or enterprises. It is also used for mergers, long-term debts like commercial real estate development, and acquisitions. This template is not legally binding but it serves as a piece of evidence that parties are involved in an investment deal and allows them to turn it into a full and legally binding agreement.

How to Write a Term Sheet?

A term sheet is a document where you can easily find the terms and conditions as well as other important details that an entrepreneur and an investor have agreed upon. This document must include the most important elements of a deal without providing too much detail on every minor contingency and must ensure that the parties involved in an investment or business transaction agree on the major aspects of the agreement, reducing the probability of misunderstandings as much as possible.

Step 1: Determine the Purpose of your Term Sheet

When you are drafting your term sheet, make sure that you are clearly and properly addressing the interest of the parties involved. Your term sheet must also include the reason for its writing, your target company at the center of your term sheet, and the date when you completed the document.

Step 2: Summarize the Terms and Conditions

In the first part of your term sheet, include a brief summary and explanation of the document’s terms and conditions, including the target company to which you are addressing the summarized terms and conditions, whether the document is legally binding or not, and the name of the buyer.

Step 3: Provide the Dividends, Liquidation Preference, and Provisions

Dividends refer to the profits distributed among the shareholders within a company, liquidation preference refers to the protection when an issue occurs, and provisions refer to the rights when operations did not go according to the plan, the company, as well as the funds of the investors that are at risk.

Step 4: Determine the Participation Rights

Participation rights are the rights that protect an investor if they chose to require a return on their investment in a company or business. With this protection, investors can confidently participate in an investment plan without risking the money they are investing.

FAQs

What are the factors that a term sheet must include?

A term sheet must include the identification information of the business owner and the investor, valuation which shows the worth of a company, investment amount, percentage stake, time frame, voting rights, and other provisions.

What are the main types of dividends?

The main types of dividends are non-cumulative in which the ownership of a dividend is determined by the Board of Directors, cumulative works in favor of an investor involved in a business or investment deal, and anti-dilution refers to the protection that stakeholders receive when a company’s valuation decreases.

What other details must a term sheet include?

Other details that you must include in your term sheet are the common shares and the preferred shares and the core terms which include certain financial aspects of an investment deal such as the capitalization table, stock options, and percentage of ownership. You must also include the confidentiality agreement and post-money value of a business or company.

A term sheet template is a formal document that outlines the terms and conditions of a business or investment plan and contains the summary of the main points of the deal while sorting out the differences between the involved parties before forming a legal agreement or contract. This template is usually used by small businesses or startup companies to attract investors with the means to financially contribute to the growth of a business.

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