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The term sheet, and the six numbers that tell you everything

A term sheet is the written version of an offer. Here is every line to check, the fees that shrink your wire, and how to compare two offers that look nothing alike.

6 minute readUpdated 2026-07-29Written by the Exp Capital desk

A term sheet is the written summary of an offer, produced after underwriting and before contracts. It is one or two pages, it is not usually binding on either side, and it is the only moment in the process where you can compare funders on identical footing. If you never get one in writing, you are not comparing offers. You are comparing sales calls.

The document goes by several names depending on who sent it. Term sheet, proposal, offer summary, approval letter, or commitment letter on a bank file, where the language actually does bind the lender subject to conditions. Whatever the header says, the job is the same: put the real numbers on paper so a decision can be made from facts instead of from a phone conversation.

Who sends it and when

The funder sends it to you, usually a few hours to a few days after your file is submitted, once underwriting has produced a real answer. On a merchant cash advance or short term working capital file, it often arrives the same day. On a bank or SBA file, it arrives after credit approval and it carries conditions that must be satisfied before closing.

There is an important distinction inside that timing. A soft offer is generated from limited information before a human has looked at everything, and the number frequently moves. A firm offer follows a full underwriting review and holds absent new information. Ask which one you are holding, because owners routinely turn down a real offer while waiting on a soft one that was never going to survive.

The lines to check on a term sheet before anything else

The six numbers that tell you everything

Amount funded, and net amount wired. These are two different numbers. If the term sheet says $100,000 and there is a five percent origination fee plus a $495 documentation fee, the amount hitting your account is $94,505. Every cost comparison should start from what arrives, not from the headline.
Total payback, in dollars. Not the rate, not the factor, the dollar total you will repay. On a factor priced deal it is fixed at signing. On an amortizing loan it is the payment multiplied by the number of payments. Ask for it as a dollar figure and refuse to move forward without it.
Payment amount and frequency. $340 a day, $1,700 a week, and $7,400 a month can all describe similar annual totals while behaving completely differently against your cash flow. See how payment frequency changes the strain.
Term, or expected duration. On an advance there is no fixed term in the loan sense, only an estimated payoff window based on the payment schedule. Get the estimate in writing anyway, because it drives the effective annualized cost.
Every fee, itemized. Origination, underwriting, documentation, program service fee, ACH fees, wire fee. Ask specifically which fees are deducted from funding and which are billed later.
Position and collateral. First or second position, whether a UCC-1 will be filed, whether the lien is blanket or specific, and whether a personal guarantee is required. These do not show up in the cost math and they shape everything you can do next.

One offer, three numbers, and why the headline is the least useful of them

The chart is the same deal described three ways. A term sheet headlined at $100,000 puts $94,505 in your account and requires $128,000 back. The honest cost of that money is $33,495 on $94,505 received, not $28,000 on $100,000, and the two framings produce meaningfully different annualized numbers. This is why total cost of capital is the only comparison that holds up.

Comparing two offers that look nothing alike

Two real shaped offers on the same $100,000 request
Line	Offer A	Offer B
Pricing shown	1.28 factor rate	22 percent annual rate, 18 months
Amount funded	$100,000	$100,000
Fees deducted at funding	$5,495	$2,000
Net wired to you	$94,505	$98,000
Payment	$1,143 per business day	$6,564 per month
Estimated duration	About 5.5 months	18 months
Total repaid	$128,000	$118,152
Cost of the money	$33,495	$20,152
Cash out of the business each month	About $25,150	$6,564

Offer B is cheaper by roughly $13,000 and easier on monthly cash flow by a wide margin. Offer A is faster and will usually fund on lighter documentation. Neither is wrong. What matters is that you cannot see any of this from the pricing line alone, because a factor rate and an annual rate are not the same kind of number. Read how to line up two offers before deciding.

What else to read before you sign

01Find the conditions
Most term sheets list stipulations: a signed application, updated bank statements, a landlord verification, a site inspection, proof of insurance. Each one is a day. Knowing them up front is how a five day close does not become fifteen.
02Find the expiration
Offers commonly expire in three to seven days. That is legitimate, since your bank data goes stale. Aggressive same day expirations paired with pressure are a different thing, and worth reading the funding red flags list over.
03Ask about early payoff in writing
On factor priced money, paying early usually saves nothing unless the sheet includes an early payoff discount. Get the discount schedule on paper before signing, not after.
04Ask what reconciliation requires
If the offer promises payment relief when sales drop, ask exactly what triggers it, what you must submit, and how long it takes. A reconciliation clause you cannot practically invoke is decoration.
05Confirm the broker compensation
Ask how the broker is paid and whether it is included in the numbers you are reading. Read how brokers get paid so the answer means something to you.

The mistakes that cost real money

Comparing a factor rate to an interest rate. A 1.28 factor is not 28 percent a year. On a five month payoff it annualizes to something far higher. Convert first, then compare.
Ignoring the fee that is deducted from funding. A fee taken out of the wire raises the real cost twice: you pay it, and you have less money working.
Signing the contract to see the terms. Some funders send full contracts instead of a term sheet. Ask for the summary page. Executing documents to learn the numbers is how people end up in deals they would not have chosen.
Letting several funders pull at once. Shopping one file through multiple brokers produces duplicate submissions, repeated inquiries, and worse pricing. Read how brokers and direct lenders differ and pick one path.
Not asking what happens at renewal. Many short term offers assume a renewal partway through, where the remaining balance is rolled into a new advance. That structure has a real cost, and it belongs in the conversation before you sign the first one.

What we do with this

Exp Capital Solutions is a broker, not a lender. We do not issue term sheets and we do not set pricing. What we do is take one packaged file to the funding partners most likely to price it well, collect the written offers, and put them in front of you in a single table with net funding, total payback, payment, frequency, and every fee spelled out in the same units. When the cheaper offer is the one that pays us less, that is still the one we point at.

Questions people actually ask

Is a term sheet binding?

Usually not. Most term sheets are a written summary of a proposed deal and either side can walk away. A commitment letter on a bank or SBA file is different and generally binds the lender subject to stated conditions. Read the header and the closing paragraph, because the language tells you which one you are holding.

What should a term sheet include?

At minimum the amount funded, the net amount wired after fees, the total payback in dollars, the payment amount, the payment frequency, the expected term, every fee itemized, the lien position, and whether a personal guarantee is required. If any of those are missing, ask before you respond to anything else.

How long is a funding offer good for?

Typically three to seven days, because the offer is built on bank data that goes stale quickly. That is normal. What is not normal is a same day expiration paired with pressure to sign before you have read the fees, which is a signal to slow down rather than speed up.

Why is the amount wired less than the amount approved?

Because origination, underwriting, documentation, and program service fees are commonly deducted from funding rather than billed separately. A $100,000 approval with $5,495 in deducted fees puts $94,505 in your account while you still repay based on the full $100,000. Always ask which fees come out of the wire.

How do I compare a factor rate offer to an interest rate offer?

Convert both to two numbers: total dollars repaid and cash leaving the business per month. A 1.28 factor repaid over about five and a half months costs far more per year than a 22 percent annual rate over eighteen months, even though 28 and 22 look close. The dollar total settles the argument.

Can I negotiate a term sheet?

Often, particularly on fees, payment frequency, prepayment terms, and the scope of the personal guarantee. The pricing itself has less room because it is set by the funder's risk model. Leverage comes from having a second written offer in hand, which is the main practical reason to collect more than one.

What is the difference between a soft offer and a firm offer?

A soft offer is generated from limited information before full underwriting and the number often changes. A firm offer follows a complete review and holds unless new information appears. Ask which you have been given, because turning down a firm offer while waiting on a soft one is a common and costly mistake.

Keep reading

Reading a term sheetA clause by clause walk through of a real offer page.Comparing two offersPutting a factor rate and an interest rate into the same units.Total cost of capitalThe only cost measure that survives across products.