This Term Sheet Template from CFI is a free example of a fundamental legal document used in private capital raising transactions.

A Term Sheet is a proposed agreement laying out the main terms and conditions surrounding an investment that could be made. More intricate and in-depth legal documents will then be drafted to accompany and elucidate the term sheet. Since there is no signatory aspect, this is a nonbinding agreement and thus performs more akin to an offer. This example term sheet template is a simple document but contains some complicated terms. Here are some definitions to aid you in your use of the template:

1. Capitalization – the total sum of a company’s stock, long-term debt, and retained earnings
2. Liquidation Rights – this sets out what will be received by which shareholders in the event of the corporation’s liquidation
3. Voting Rights – this defines who among the shareholders may vote on certain policy issues

Before a Term Sheet is delivered to potential investors there are typically other documents that can be sent as well. These include a Teaser (also know as a 1-Pager), a Non-Disclosure Agreement (NDA), and a Management Presentation. These documents are accompanied or followed by the Term Sheet and Offering Memorandum. If an investor decides to move forward then the final document called a Subscription Agreement will be signed.  

How to Edit a Term Sheet Template

Download the free template, then get ready to edit and customize it for your own situation. You'll need to think about items such as the type of securities being offered, offering size, issue price, commission, capitalization, dividends, interest, liquidation rights, conversion rights, anti-dilution rights, voting rights, use of proceeds, closing conditions, and other factors. Once you know all those details you can go about editing the term sheet template to include all the necessary information. Be sure to work closely with a professional legal advisor when delivering a term sheet.  

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