COMMERCIAL LOAN TERM SHEET

This Term Sheet outlines the proposed terms and conditions under which [Your Company Name] ("Lender") will extend a commercial loan to [Borrower Company Name] ("Borrower"). This document serves as a foundation for negotiations and is not a binding agreement until all terms are finalized and a formal loan agreement is executed.

The primary objective of this Term Sheet is to define key loan parameters such as the amount, interest rate, maturity, and covenants, ensuring clarity and mutual agreement before drafting the formal loan documentation.

I. BASIC INFORMATION

Lender Information	Borrower Information
[Your Company Name] [Your Company Address] [Your Company Email] [Your Company Number]	[Borrower's Company Name] [Borrower's Company Address] [Borrower's Company Email] [Borrower's Company Number]

The table above defines the principal parties involved in this commercial loan. Both parties' names and the effective date of the Term Sheet must be accurately provided to establish the validity of the document.

II. LOAN TERMS

The specific terms under which the loan will be provided are as follows:

• Loan Amount: $[Loan Amount]

• Interest Rate: [Interest Rate]% per annum

• Maturity Date: [Maturity Date]

• Repayment Schedule: [Repayment Terms]

This section details the essential financial components of the loan, including the total amount lent, the interest rate applicable, and the timeline for repayment. Clarity in this section helps prevent future disputes or misunderstandings.

Both the Lender and Borrower must agree on these terms as they directly impact the financial obligations and the cash flow of the Borrower.

III. FEES AND PENALTIES

The following fees are applicable under this loan:

A. Loan Origination Fees: Specify any upfront fees charged by the lender for processing the loan application and disbursing funds.

B. Prepayment Penalties: Outline any penalties imposed on the borrower for paying off the loan before the specified maturity date.

C. Late Payment Fees: Define the fees charged to the borrower for failing to make payments on time as per the agreed-upon schedule.

D. Non-Sufficient Funds (NSF) Fees: Clarify the charges incurred by the borrower for insufficient funds or bounced checks related to loan payments.

E. Default Interest Rate: Specify the increased interest rate that applies if the borrower defaults on the loan, providing clarity on the consequences of non-payment.

IV. COVENANTS AND CONDITIONS

The Borrower agrees to adhere to the following covenants:

• Maintain a minimum cash balance of $[Minimum Cash Balance]

• Provide quarterly financial statements within 45 days following the end of each fiscal quarter

• No further encumbrances on the company assets beyond the agreed current levels

• Breach of Covenants: To establish the terms and conditions for a construction loan, delineating aspects such as loan amount, draw schedule, interest rate, completion requirements, and disbursement process, streamlining the communication between the lender and borrower during the construction phase. Additionally, the agreement outlines that any breach of the representations and warranties contained within it will constitute a breach of covenants, triggering appropriate remedial actions as stipulated in the agreement.

Covenants are crucial as they provide the Lender with assurances that the Borrower will maintain a certain level of financial health and transparency. Violation of these covenants could result in penalties or acceleration of the loan.

V. PREPAYMENT

A. DEFAULT AND REMEDIES

• Default Conditions: The borrower shall be considered in default under the terms of this agreement if any of the following events occur: failure to make scheduled loan payments within [number] days of the due date, breach of covenants specified in Section IV, insolvency or bankruptcy filing, or material adverse change in the borrower's financial condition.

• Remedies: In the event of default, the lender reserves the right to accelerate the repayment of the outstanding loan balance, pursue legal action for recovery, and exercise any rights and remedies available under applicable law. The borrower shall be liable for all costs and expenses incurred by the lender in connection with enforcing its remedies.

B. COLLATERAL

• Description of Collateral: The borrower shall provide as collateral for this loan, including but not limited to real estate, equipment, inventory, and accounts receivable, with an aggregate estimated value of not less than [dollar amount].

• Valuation Methods: Collateral valuation shall be determined by conducting an independent appraisal agreed upon by both parties and updated annually.

• Handling of Collateral: In the event of default, the lender may take possession of and liquidate the collateral to satisfy the outstanding loan obligations, following the procedures outlined in applicable law.

C. REPRESENTATIONS AND WARRANTIES

• Financial Condition: The borrower represents and warrants that all financial statements and information provided to the lender are true, accurate, and complete in all material respects, and there has been no material adverse change in the borrower's financial condition since the date of such statements.

• Business Operations: The borrower represents and warrants that it is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, and has the legal authority to enter into and perform its obligations under this agreement.

• Breach Consequences: Any breach of the representations and warranties contained herein shall constitute an event of default under Section IV, entitling the lender to exercise its remedies as set forth therein.

D. CONDITIONS PRECEDENT

• Disbursement Requirements: The disbursement of the loan proceeds is subject to the satisfaction of the following conditions precedent: execution and delivery of this agreement by all parties, receipt of all necessary regulatory approvals, and completion of due diligence satisfactory to the lender.

• Documentation: The borrower shall provide the lender with all documentation reasonably requested to evidence the satisfaction of the conditions precedent, including legal opinions, certificates of good standing, and insurance policies.

Prepayment terms are included to compensate the Lender for potential loss of interest income. These terms must be carefully reviewed to ensure they align with the Borrower's financial planning and cash flow forecasts.

VI. GOVERNING LAW

The Term Sheet and the loan agreement will be governed by the laws of [Jurisdiction]. Both parties agree to submit to the jurisdiction of courts located in [Court Location] for any disputes arising under this agreement.

Specifying the governing law and jurisdiction helps prevent legal ambiguities in the interpretation of the agreement. It is advisable for each party to consult with their legal advisors to ensure compliance with local laws and that their interests are properly protected.

Please review this Term Sheet thoroughly. Any changes or additional details should be negotiated before progressing to the drafting of the final loan agreement. This Term Sheet is intended solely for discussion purposes and, except for the sections explicitly specifying otherwise, does not constitute a legally binding document.

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