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. Angel Investor

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

    Contract terms and conditions, disclosures or other important ...
  3. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  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. Provisional Patent Application

    A short-term means of protecting an invention that requires less ...
Related Articles
  1. How Venture Capitalists Make Investment ...
    Entrepreneurship

    How Venture Capitalists Make Investment ...

  2. How To Invest In Private Companies
    Investing Basics

    How To Invest In Private Companies

  3. How To Invest In Private Equity
    Mutual Funds & ETFs

    How To Invest In Private Equity

  4. When Your Business Needs Money: Angel ...
    Options & Futures

    When Your Business Needs Money: Angel ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center