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Reading a term sheet, including the parts with no dollar sign

The six numbers a term sheet must show, what every fee line actually costs, and a worked $100,000 offer where a 1.30 factor prices out at 84 percent a year.

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

A term sheet is a one page summary of an offer. It is not a commitment, it is not funding, and it is not the contract you will eventually sign. It exists so you can compare offers, which means the only thing that matters is whether it contains enough to compare with. Most do not.

The good news is that a term sheet has a small number of moving parts and you can price one in about four minutes once you know the order. The bad news is that roughly half the cost of a deal lives in lines that carry no dollar figure at all, and those are the ones nobody reads out loud on the phone.

The lines that decide the price, and the lines that decide the worst day

The six numbers that must be on it

If any of these six is missing, the document is not a term sheet, it is a marketing piece. Ask for the missing number in writing before you spend another minute on it.

1. Amount funded and net proceeds: The gross approval and, separately, the dollars that will actually hit your bank account. These are not the same number and the gap is entirely fees.
2. The price: A factor rate, an interest rate, or a discount rate. Written as a figure, not as a range and not as a monthly percentage.
3. Total payback: The full dollar amount you will repay. On a factor rate deal this is fixed at signing and there is no reason it cannot be printed. See total payback.
4. Payment amount and frequency: Daily, weekly, or monthly, and the exact dollar figure per payment. If it is a percentage of sales, the holdback percentage and an estimated dollar amount.
5. Term and payment count: How many payments and over what period. Without this you cannot convert anything to an APR, which may be the point.
6. Every fee, itemized: Origination, underwriting, documentation, ACH per payment, wire, UCC filing. And for each one, whether it comes off the top or is billed separately.

A worked term sheet, priced properly

Here is an ordinary offer, of the kind that arrives by email at four in the afternoon with a signature request attached.

What the term sheet says
Line	As written
Approved amount	$100,000
Factor rate	1.30
Total repayment	$130,000
Payment	$666.67 per business day
Term	195 business days, approximately 9 months
Origination fee	3 percent
Underwriting fee	$495
Wire fee	$50

Most owners read that and do a quick sum. Thirty percent over nine months, annualize it, call it 40 percent. That is the wrong arithmetic twice over, and both errors run the same direction.

First, the fees. Three percent of $100,000 is $3,000, plus $495, plus $50, which is $3,545 off the top. You will receive $96,455, not $100,000. Your obligation is still $130,000.

Where the $130,000 of payback actually goes

Second, amortization. You never hold $96,455 for nine months, because you start repaying it the next business day. The average balance you actually had use of is roughly 55 percent of that. Run the conversion from factor rate to APR and this offer prices out at about 84 percent a year, not 40. The cost is $33,545 on $96,455 received.

What the term sheet implies: 30 percent, roughly 40 percent annualized
Cash you actually receive: $96,455
Total you actually repay: $130,000
Real cost of capital: $33,545
Real approximate APR: About 84 percent nominal

The lines with no dollar sign, and what they cost

These are the clauses that decide what happens on the worst day of the deal, which is the only day they matter. Each one is negotiable more often than owners assume, and never after signing.

Additional financing clause. Taking any other capital while this is open is an event of default. This is the clause that makes stacking a contract breach even when you keep paying on time.
Security interest and blanket lien. Most working capital deals take a blanket lien on all business assets and file a UCC. Check whether it is truly blanket or limited to receivables, because a blanket lien blocks equipment financing later.
Personal guarantee scope. A performance guarantee covers fraud and misrepresentation. A full personal guarantee covers the money. They are one word apart in the document and worlds apart in consequence.
Reconciliation. If the deal promises to adjust payments when sales drop, find the exact trigger, the notice period, and what you must submit. A reconciliation right you cannot practically invoke is not a right. See reconciliation.
Early payoff. With a fixed factor, paying early saves nothing unless a discount schedule is written in. Ask for the schedule in the contract, not in an email. See prepayment and early payoff.
ACH authorization and revocation. Look for whether you can revoke the debit authorization and what happens if you do. In many agreements revoking is itself a default.
Default and acceleration. What counts as default, whether there is a cure period, and whether the full remaining balance becomes due immediately.
Choice of law, venue, arbitration, class action waiver. These decide where you would have to fight and how much it would cost to get there. A New York venue clause on a Texas business is a real expense.
Confession of judgment. Restricted in New York for out of state merchants and limited in a number of other states, but still worth searching the document for. See what a COJ is.

Fees, and which ones move

Not every fee is fixed, and the ones that are negotiable are usually the ones nobody asks about. In our experience placing files, the origination fee moves most often, the underwriting fee sometimes, and the factor rate almost never, because the factor is an output of the credit box rather than a rate card.

The fee lines and what they do to the price
Fee	Typical size	Effect on your cost
Origination or packaging	1 to 5 percent of the funded amount	Comes off the top. Raises the APR directly, roughly two points per percent on a nine month deal.
Underwriting or documentation	$195 to $995 flat	Off the top. Small in dollars, worth asking to waive.
ACH or transaction fee	$0 to $10 per payment	Sits on top of the total payback. At $5 across 195 payments that is $975 you never see quoted.
Wire fee	$25 to $75	Off the top. Ask for ACH delivery instead and it disappears.
UCC filing	$50 to $150	Off the top. Real cost, rarely negotiable.
NSF or returned payment	$25 to $50 per event	Only if a debit fails, and it compounds fast once it starts.
Default or late fee	Varies widely	Read this one before you need it, not after.

Add the ACH fees to our example and the picture shifts again. At $5 a payment across 195 payments, that is $975 on top of the $130,000, which is not a rounding error. The complete arithmetic is on total cost of capital.

What happens between the term sheet and the money

From signed term sheet to funds in the account

Signing the term sheet does not start funding. It starts verification, and verification is where most of the delay lives. Expect a bank connection or a request for the most recent statements, a landlord or business verification call, a UCC search, a check that the entity is in good standing with the state, and a short recorded call confirming you understand the payment. None of that is unusual and none of it should surprise you.

What should concern you is anything that arrives in this window and was not on the term sheet. A new fee, a shortened term, a request for a second guarantor, or a document you are asked to sign quickly because the offer expires tonight. Deadlines that appear only after you have committed are a sales technique, not an underwriting constraint. The offer that is real today is real tomorrow.

Six questions before you sign anything

Ask all six in one email so the answers are in writing. A funder or broker who answers all six plainly is one you can work with. Vagueness on any of them is information.

What is the exact dollar amount that will hit my account?
What is the total I will repay, including every fee?
How many payments, of exactly how much, over exactly how many days?
What is the early payoff discount, in a schedule?
What does this contract say happens if I miss one payment?
What are you being paid on this deal, and by whom?

Every number on a term sheet is negotiable before you sign and none of them are afterward.

What we do with this

Exp Capital Solutions is a broker. We do not issue term sheets, set pricing, or approve files. What we do is collect every offer a file generates and rewrite them onto one page in the same format: net proceeds, total payback, payment, term, converted APR, and the three clauses most likely to bite. Then we tell you which one we would sign and why. If the answer is that none of them are worth it right now, we say that. It costs us the deal and it is still the right answer more often than the industry admits.

Questions people actually ask

Is a term sheet legally binding?

Generally no. A term sheet summarizes a proposed offer and is usually explicitly non binding on the funder. What can bind you is what is attached to it: signing often authorizes a credit pull, a bank data connection, and occasionally an exclusivity period. Read the signature block before you sign the summary.

What should a business funding term sheet include?

Six things: the amount funded and the net proceeds after fees, the factor or interest rate, the total payback, the payment amount and frequency, the number of payments and the term, and every fee itemized with a note on whether it comes off the top. Anything missing one of these cannot be compared to another offer.

Why is my net funding less than the approved amount?

Fees come off the top before the wire. On a $100,000 approval, a 3 percent origination fee, a $495 underwriting fee and a $50 wire fee leave $96,455 in your account while your repayment obligation stays at the full $130,000. Always ask for the net proceeds figure specifically.

Can I negotiate a term sheet?

Yes, and the fee lines move most. Origination is negotiable more often than not, underwriting and wire fees are frequently waived if you ask, and ACH delivery instead of a wire removes that line entirely. The factor rate itself rarely moves, because it is an output of the underwriting file rather than a price list.

What is the difference between a term sheet and a commitment letter?

A term sheet proposes terms and is normally non binding. A commitment letter states that the funder will fund, subject to listed conditions, and carries real weight. If you need certainty for a closing or a purchase, ask which document you are holding, because the two are often used interchangeably in conversation and never in court.

Should the term sheet match the funding agreement?

It should, and you must verify it does. Fees appearing in the agreement that were not on the term sheet, a shorter term, or a new arbitration or judgment clause are all common. Put the two documents side by side and check the six core numbers before signing the agreement.

What if the term sheet has no APR on it?

That is normal for advances, since an advance is legally a purchase of receivables rather than a loan and no interest accrues. Convert it yourself: total cost divided by 55 percent of the cash you receive, divided by the term in years. A growing number of states now require a commercial financing disclosure that includes an annualized rate.

Keep reading

Term sheetThe document itself, and how it differs from a commitment.Factor rate to APRThe conversion that turns a term sheet into a price.Total cost of capitalEvery fee, including the ones billed after funding.