Term Sheet
Term Sheet in Practice
A sponsor under contract to buy a $20,000,000 multifamily property receives a term sheet proposing a $13,000,000 loan at 65% LTV, a five-year term with 30-year amortization, non-recourse with standard carve-outs, a 1% origination fee ($130,000), and a $75,000 expense deposit covering the appraisal, environmental, and lender legal costs. Nothing except the deposit and exclusivity provisions binds either side, but the sheet becomes the benchmark every later document, especially the loan commitment, is measured against.
Term Sheet: What the Market Actually Requires
The term sheet sits in the middle of the deal timeline: the letter of intent and purchase contract define what you are buying, the term sheet defines how a lender proposes to finance it, and the loan commitment, issued after underwriting, converts proposal into obligation. Sophisticated borrowers run a process: the deal goes to multiple capital sources, competing term sheets come back within one to two weeks, and the comparison happens on the whole structure, not the headline rate. Proceeds, recourse, prepayment flexibility, reserve requirements, extension tests, and cash management terms routinely matter more to returns than a small pricing difference.
Reliability varies by lender type. Life insurance companies are the most disciplined quoters in the market; their term sheets are vetted internally before issuance and rarely move. Banks are generally reliable but subject to credit committee, so treat a bank sheet as a well-informed intention. Debt funds and CMBS originators issue sheets quickly and competitively, which is useful, but the gap between sheet and final terms is widest there; CMBS terms in particular can shift with the securitization market up to rate lock. Everywhere, the words 'up to' before the loan amount mean the number is an aspiration, not a quote.
Negotiate the sheet itself. Deposit refundability if the lender retrades material terms, the length of any exclusivity period, defined underwriting contingencies, and a stated timeline to commitment are all fair asks before signing. The most common borrower mistake is signing the first sheet received to save two weeks; without a competing sheet in hand you have no leverage when underwriting surfaces an issue, and retrades land hardest on borrowers who cannot credibly walk.
Why It Matters for Your Loan
The term sheet is where your leverage peaks. Before you sign, lenders are competing; after you sign and fund the deposit, switching costs money and time you may not have under a purchase contract. Getting the structure right at the sheet stage, proceeds, recourse, prepayment, reserves, prevents the expensive version of the fight at commitment. Commercial Lending Solutions typically brings each deal to multiple capital sources among 1,000+ lender relationships, so sponsors sign a term sheet with real alternatives behind it.
Term Sheet: FAQ
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