What is a term sheet from a commercial lender?
A term sheet is a written summary of proposed loan terms from a commercial lender, including the loan amount, rate, term, fees, and key conditions, issued after the lender has reviewed your application and the specific property. Signing a term sheet is usually a non-binding acceptance that moves the file into full underwriting, often within 1 to 2 weeks, and typically triggers a deposit for third-party reports like the appraisal.
What a term sheet typically includes
| Element | What it shows |
|---|---|
| Loan amount | Maximum the lender is proposing |
| Rate | Fixed or the index and spread if variable |
| Term and amortization | How long the loan runs and how payments are structured |
| Fees | Origination points, application fees, third-party report costs |
| Prepayment terms | Penalty structure, if any |
| Conditions to close | Appraisal, environmental report, entity documents, insurance |
| Rate lock terms | Whether and when the rate locks |
| Expiration date | How long the term sheet itself is valid |
Ranges vary by lender and loan type.
Is it binding?
Generally not, in the sense that either party can walk away, but signing it often does 2 real things: it authorizes the lender to order paid third-party reports (appraisal, environmental) which are usually non-refundable, and it signals you accept the proposed terms as the basis for moving forward, meaning renegotiating them later without a good reason (like a bad appraisal) can slow or kill the deal.
Term sheet vs commitment letter
A term sheet is issued earlier, before full underwriting, and is more of a proposal. A commitment letter comes later, after underwriting is largely complete, and represents the lender's actual agreement to fund subject to a shorter list of remaining conditions. See the dedicated answer on that distinction for more detail.
What happens after you sign
- You pay any deposit required for third-party reports.
- The appraisal, environmental report, and any other underwriting items are ordered.
- The lender's underwriting team completes full review.
- Assuming everything checks out, a commitment letter or final loan documents follow.
Why comparing term sheets matters
Because a term sheet is largely proposal-stage, comparing multiple lenders' term sheets before choosing one to pursue in full underwriting is the highest-leverage moment in the process, since the fees for third-party reports are typically non-refundable once you commit to one lender's path.
Red flags in a term sheet
- Fees due before any term sheet is issued at all.
- Terms that seem unusually favorable compared to the rest of the market, without explanation.
- No expiration date, or an unusually short one paired with pressure to sign immediately.
- Vague or missing prepayment terms.
How CommFi handles it
Our lending desk prices your deal and often brings back competing term sheets from multiple lenders in the network so you can compare before committing to third-party report costs with any one lender. It funds direct when it fits, and when the desk searches a database of 7,000+ lenders, the ones that fit compete for your business before you spend on reports. Zero upfront fees.
Related reading
Related questions
- What is a term sheet on a commercial loan?
- A written summary of proposed loan terms, including amount, rate, term, and fees, issued after the lender reviews your application and the property.
- Is a term sheet legally binding?
- Generally not fully binding on either side, though signing it often authorizes paid third-party reports and signals acceptance of the proposed terms.
- What is the difference between a term sheet and a commitment letter?
- A term sheet is an earlier-stage proposal before full underwriting. A commitment letter comes later and represents the lender's actual agreement to fund.
- Do I pay anything when I sign a term sheet?
- Often, yes, a deposit to cover the appraisal, environmental report, or other third-party costs, which are typically non-refundable.
- Should I compare term sheets from multiple lenders?
- Yes, ideally before committing to any one lender's third-party report costs, since that is the highest-leverage point in the process to compare offers.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.