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. Franchise disclosure document

    A Franchise Disclosure Document (FDD) is a legal document presented ...
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. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center