3 Questions to Ask Before Signing a Term Sheet

PUBLIC SERVICE ANNOUNCEMENT: If you need money in the next 5-6 months then you should have ALREADY started looking for funding. This process can be slow and you don’t want to wait till the last minute. Contact us today to get started!

Okay so before we dive into 3 questions to ask yourself before signing a term sheet let’s talk about what a term sheet actually is.

A term sheet is a loan offer in summary form.

It will include the amount you’ve been approved for, the interest rate and the details of the deal.

It’s what comes after the processor and underwriter have reviewed and requested most of the documents for your deal. The lender will look over these documents and determine how much they are willing to approve you for, at what rate, for how long, etc.

Now that you know what a term sheet is how do you know if it’s the best deal for your company?

Here are three questions to ask to determine if this term sheet is the right deal for you.

1.Does this term sheet smell fishy?

Before signing a term sheet you need to know the reputation of the lender offering you the money as well as the broker you are working with.

Your first step in determining their trustworthiness is just google them. What reviews come up? Do they have a professional website? How long have they been open for?

No company will ever have 100% positive reviews, it’s impossible so read with a grain of salt.

Next, are they asking for money before closing?

No broker should be requesting money BEFORE closing. This is not something that is often included in the term sheet but you must be aware of those points too.

Sometimes with bigger deals lenders will request money as a test to your intentions. They want to work with you if you are serious about the deal. If they request money upfront always read the fine print so you understand exactly what you are agreeing to.

Does the lender hold up or are they a little fishy?

2. Will this loan help my business grow in the long run?

Often times business owners will look at the cost of the loan upfront then become apprehensive because it seems too expensive.

Stop looking at this from this month’s perspective and start looking at the long term. Can this money lead to more money for you and your company? Will it open more doors and more possibilities?

If your business REALLY needs the money now but you know you have a new client coming or revenue in next month then it may be worth the fees to make it to that point.

Weigh your current cost with the long term possibilities then decide if this is right or not.

3. Should I wait for a better offer?

Before asking this third question reflect on number 2. If you REALLY need the money now to keep your employees paid and the lights on take the deal.

If you see an opportunity for more business then survive today and work towards thriving tomorrow.

Now if you aren’t needing the money immediately you definitely should be looking at multiple term sheets. A good broker should be flushing out all their possible lenders.

This ensures that you have options and can then sign the best term sheet and later receive the best loan for your unique business.

We at Legacy Capital Lending have been doing this a while. We know a ton of lenders and we know what their comfort zone are. This means we turn to the right lenders to get you the best term sheets possible as fast as possible.

Needing a loan sooner or later?

Contact us today, we can help.

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