Sample Term Sheet for Commercial Loan

1. Loan Amount:
The borrower is seeking a loan amount of $5,000,000. This amount will be used for the expansion of the borrower’s business operations and other related capital expenditures.

2. Loan Term:
The loan term is 5 years from the closing date. This includes a 2-year interest-only period followed by a 3-year amortization period.

3. Interest Rate:
The loan will have an interest rate of 4.5% per annum, fixed for the entire term. This rate is based on the lender’s current benchmark and may be subject to adjustments based on market conditions.

4. Repayment Schedule:
During the 2-year interest-only period, the borrower will only make interest payments. After this period, the borrower will commence principal and interest payments, calculated on a monthly basis over the remaining term.

5. Fees and Costs:

• Origination Fee: 1% of the total loan amount, payable at closing.
• Legal Fees: All legal fees associated with the preparation of the loan documents and closing will be borne by the borrower.
• Prepayment Penalty: If the borrower decides to prepay the loan within the first 2 years, a penalty of 2% of the outstanding principal will apply.

6. Security:
The loan will be secured by a first lien mortgage on the borrower’s commercial property located at [Property Address]. Additionally, the borrower will provide a personal guarantee from the principal owner of the business.

7. Covenants:
The borrower must adhere to the following financial covenants:

• Debt Service Coverage Ratio (DSCR): The borrower must maintain a DSCR of at least 1.2x.
• Minimum Cash Balance: The borrower must maintain a minimum cash balance of $500,000.

8. Events of Default:
Events of default include, but are not limited to:

• Failure to Make Payments: Failure to make scheduled payments within 15 days of the due date.
• Breaches of Covenants: Failure to comply with the financial covenants outlined in the term sheet.
• Bankruptcy: The borrower’s declaration of bankruptcy or insolvency.

9. Use of Proceeds:
The loan proceeds are intended for the following purposes:

• Expansion of Business Operations: $3,000,000
• Purchase of Equipment: $1,000,000
• Working Capital: $1,000,000

10. Documentation Requirements:
The borrower must provide the following documents before loan closing:

• Financial Statements: Audited financial statements for the past 3 years.
• Business Plan: A detailed business plan outlining the use of loan proceeds and projected financial performance.
• Property Appraisal: A recent appraisal of the commercial property to be used as collateral.

11. Closing Conditions:
The closing of the loan is subject to the following conditions:

• Satisfactory Due Diligence: Completion of due diligence to the satisfaction of the lender.
• Insurance Requirements: Proof of adequate insurance coverage on the collateral property.
• Approval of Legal Documentation: Execution of all necessary loan documentation and legal agreements.

12. Contact Information:
For further information or inquiries regarding this term sheet, please contact:

• Loan Officer: John Doe
• Phone: (555) 123-4567
• Email: [email protected]

13. Governing Law:
The term sheet and loan agreement will be governed by and construed in accordance with the laws of the State of [State].

14. Confidentiality:
All terms and conditions outlined in this term sheet are confidential and should not be disclosed to third parties without the prior written consent of both parties involved.

15. Expiration:
This term sheet is valid until 30 days from the date of issuance. If not accepted within this period, the terms may be subject to change.