Term sheet
What is a term sheet in commercial lending, and how binding is it?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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A term sheet sets out the proposed shape of a facility — amount, purpose, tenor, pricing, security, covenants and conditions — before any documents are drafted. In commercial lending it is usually indicative until credit has approved it, and even an approved term sheet is normally subject to documentation and conditions precedent rather than a commitment to lend. Its real value is as the place where structure is argued: a point conceded on the term sheet is very hard to win back in the facility letter.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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