Term Sheet

AAA

DEFINITION of 'Term Sheet'

A non-binding agreement setting forth the basic terms and conditions under which an investment will be made. A term sheet serves as a template to develop more detailed legal documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is then drawn up.

INVESTOPEDIA EXPLAINS 'Term Sheet'

A term sheet lays the groundwork for ensuring that the parties involved in a business transaction are in agreement on most major aspects of the deal, thereby precluding the possibility of a misunderstanding. It also ensures that expensive legal charges involved in drawing up a binding agreement or contract are not incurred prematurely.

They generally cover the more important aspects of a deal, without going into every minor detail and contingency covered by a binding contract. For example, a term sheet from a venture capital company that is investing in an early-stage company may contain such details as the amount of investment, the percentage stake sought, anti-dilutive provisions and valuation.

RELATED TERMS
  1. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  2. Angel Investor

    An investor who provides financial backing for small startups ...
  3. Fine Print

    Contract terms and conditions, disclosures or other important ...
  4. Seed Capital

    The initial capital used to start a business. Seed capital often ...
  5. Staple Financing

    A pre-arranged financing package offered to potential bidders ...
  6. Freelancer

    A freelancer is an individual who earns money on a per-job or ...
RELATED FAQS
  1. How legally binding is a letter of intent?

    A signatory may be bound to a letter of intent depending on how the letter is drafted. In a business-to-business transaction, ... Read Full Answer >>
  2. If I retire in the Philippines, will I be able to work or start a small business?

    Foreign retirees entering the Philippines with plans to become permanent residents may start a business or work once they ... Read Full Answer >>
  3. What are some good resources to help entrepreneurs develop a business model?

    There are a number of resources available for entrepreneurs developing business models. Online resources provided by bloggers, ... Read Full Answer >>
  4. What's the difference between a financial plan and a financial forecast?

    Selecting the appropriate business structure for a new company can present challenges to an entrepreneur. Considerations ... Read Full Answer >>
  5. What are some examples of how corporations manage short-term investments?

    One of the easiest ways for a business owner to reduce liability is to incorporate as a legal entity to enjoy the protection ... Read Full Answer >>
  6. How can I merge technical analysis and fundamental analysis with quantitative analysis ...

    It is important for a sole proprietor with no employees to register as a limited liability company because an LLC provides ... Read Full Answer >>
Related Articles
  1. Entrepreneurship

    How Venture Capitalists Make Investment Choices

    In order to increase your odds for receiving funding, here are some criteria considered by venture capitalists.
  2. Investing Basics

    How To Invest In Private Companies

    It can be tough to invest in a company that doesn't trade on an exchange, but there are also several advantages.
  3. Mutual Funds & ETFs

    How To Invest In Private Equity

    Private Equity might be a pricey investment, but returns are on the rise and the payoff could be big.
  4. Options & Futures

    When Your Business Needs Money: Angel Investors

    If you have a promising business that needs a boost, you may be able to put your faith in these wealthy investors.
  5. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  6. Entrepreneurship

    Can I Become An Angel Investor?

    Because of SEC rules, you already need significant assets to become an angel investor.
  7. Economics

    Tech Startup Momentum Being Generated In Detroit

    Rising from the ashes in the once proud auto-manufacturing City of Detroit is a rapidly emerging tech startup scene that could prove to be its salvation.
  8. Entrepreneurship

    The 10 Richest Women In Fashion

    The top 10 richest women in fashion have many similarities as well as differences. From nationality to career trajectory, these women have established themselves in their own unique ways.
  9. Entrepreneurship

    8 Fascinating Traits Billionaires Have In Common

    A top-notch education isn't enough to strike it rich. Nothing compares to learning the habits of the world's famous entrepreneurs and industry leaders.
  10. Entrepreneurship

    The 10 Richest Women In Tech & Media

    These 10 women are the wealthiest in tech and media.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center