Free Construction Loan Term Sheet Template
CONSTRUCTION LOAN TERM SHEET
I. Introduction
This Term Sheet ("Term Sheet") outlines the terms and conditions for the construction loan between [Lender Name] ("Lender") and [Borrower Name] ("Borrower") to finance the construction of [Project Name] ("Project"). The parties agree that this Term Sheet serves as a preliminary agreement and does not constitute a legally binding contract until a formal loan agreement is executed. This document is prepared with the intention of streamlining communication and ensuring clarity between the parties involved.
II. Loan Details
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Loan Amount: The total loan amount provided by the Lender shall be [Loan Amount], which includes provisions for contingencies and unforeseen costs.
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Interest Rate: The interest rate applicable to the loan shall be [Interest Rate], compounded [Frequency], ensuring a competitive yet feasible financing arrangement for the Borrower.
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Loan Term: The loan shall have a term of [Loan Term] months, commencing on the date of the first disbursement, allowing sufficient time for the completion of the construction project.
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Repayment Schedule: Repayment of the loan shall commence [Repayment Start Date] and shall be made in [Number of Payments] equal installments of [Payment Amount] each, with the final payment due on [Final Payment Date], aligning with the project's expected cash flow.
III. Draw Schedule
The disbursement of funds shall be based on the completion of predetermined stages of the construction project. The following draw schedule shall apply:
|
DRAW NUMBER |
Percentage of Completion |
Amount Disbursed |
|---|---|---|
|
I |
20% |
4,000,000 |
|
II |
50% |
10,000,000 |
|
III |
80% |
18,000,000 |
|
IV |
100% |
20,000,000 |
IV. Completion Requirements
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Inspections: Borrower shall permit periodic inspections by Lender or its agents to verify the progress and quality of construction, ensuring compliance with the agreed-upon standards and specifications.
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Certificates: Borrower shall provide Lender with certificates of occupancy and completion upon project completion, indicating compliance with all relevant regulations and requirements.
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Insurance: Borrower shall maintain appropriate insurance coverage for the duration of the construction period, including but not limited to builder's risk insurance, liability insurance, and workers' compensation insurance.
V. Disbursement Process
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Submission: The borrower shall submit a draw request along with necessary documentation to the Lender, including invoices, progress reports, and lien waivers.
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Approval: The lender shall review the draw request and approve disbursement based on the completion percentage and compliance with the terms of the loan agreement.
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Disbursement: Upon approval, Lender shall disburse funds within [Disbursement Timeframe] business days, facilitating timely payment to contractors and suppliers.
VI. Additional Provisions
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Default: In the event of default, the Lender shall have the right to accelerate the loan and pursue remedies as permitted by law, safeguarding the interests of both parties.
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Governing Law: This Term Sheet shall be governed by the laws of [Governing Law Jurisdiction], providing a legal framework for the resolution of any disputes that may arise.
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Amendment: Any amendments to this Term Sheet shall be made in writing and signed by both parties, ensuring transparency and mutual agreement on any changes to the terms.
VII. Execution
This Term Sheet is subject to the approval of both parties and shall not be binding until executed by authorized representatives of the Lender and Borrower. By signing below, the parties acknowledge their understanding and acceptance of the terms outlined herein, paving the way for the commencement of the construction project.
