Term Sheet refers to the terms and conditions of an investment deal between the issuer and an investor which are non-binding in nature. Non-binding nature means it does not have any legal obligations. Eg: a vote to find out what people feel about a particular law but which will not necessarily lead to a change in the law It is a set of guidelines of the law of contract.

It is a crucial document to attract investors to raise capital for enterprises.

What is Included in a Term Sheet?

1. Issuer details- The company's entire name has to be mentioned

2. Issue size of the debt- Exact facility amount needs to be provided

3. Type of the instrument- To determine if the debt is secured or unsecured

4. Seniority- It refers to the order in which the holder of the debt will be repaid under the circumstances of bankruptcy of the issuer.

5. Convertibility-The bonds have an option to convert into equity or not.

6. Tenor-The final maturity date of the issued bond

7. Interest Payment-This is the interest payments that are to the bondholder at a fixed rate of interest until the maturity of the bond either annually, quarterly, or semi-annually

8. Purpose of the bond-The use of proceeds from the issue of the bond.

9. Settlement date- The date when a trade is final and the buyer must pay to the seller while the seller delivers the assets to the buyer. The settlement is usually done after two business days after the execution date.

10. Close date-The date on which the assets are delivered to the buyer.

11. Call option- It is an option in the bond that allows the issuer to call back the bondholder before maturity by paying back the principal amount if the interest rates decline before the maturity of the bond then bonds can be re-issued at a lower coupon rate.

12. Financial covenants-It is a promise from the issuer to the bondholders that certain legal activities will or will not be carried out

13. Governing law- It is a law under which two parties in the agreement intend the contract to be governed

14. Trustee-Its is a financial institution that is granted certain powers such as to check if the bond interest payments and principal repayments are made on time and protect the bondholders if the issuer defaults.

15. Lenders- Lenders are the different banks as well as no financial institutions who perform different roles in the syndication of the bond.

16. Credit ratings- The company ratings are provided by the credit rating agencies like Fitch, Moody's, S&P.

The term sheet allows the investor to value the company at a higher amount helps to discuss certain contract terms, allows you to move out of a deal if you cannot reach an agreement.

The term sheets set a structure for ensuring that the parties involved in a business transaction agree on major aspects of the deal and reduce the unnecessary disputes between both parties.