The Business Loan Term Sheet is a crucial document in Canadian commercial lending practices, used when a financial institution and a business entity are negotiating the terms of a potential loan. It serves as a preliminary agreement that outlines the fundamental aspects of the proposed financing arrangement, including key commercial and legal terms. While generally non-binding, it forms the foundation for the subsequent loan documentation and helps ensure all parties have a clear understanding of the proposed terms. The document must comply with Canadian federal banking regulations and provincial lending laws, making it essential to incorporate relevant legal requirements while maintaining clarity and commercial practicality. Term sheets are typically issued after initial credit approval but before the preparation of detailed loan documentation, helping streamline the negotiation process and reduce legal costs by addressing key terms early in the transaction.
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1. Parties: Identification of the lender and borrower, including full legal names and addresses
2. Background: Brief context of the proposed loan transaction
3. Definitions: Key terms used throughout the term sheet
4. Loan Amount and Type: Specification of the principal amount and type of loan facility
5. Interest Rate: Details of interest rate, calculation method, and payment frequency
6. Term and Repayment: Duration of the loan and repayment schedule
7. Security: Overview of required security and collateral
8. Conditions Precedent: Conditions that must be met before loan disbursement
9. Representations and Warranties: Basic statements of fact about the borrower's business and capacity
10. Covenants: Key financial and operational commitments of the borrower
11. Events of Default: Circumstances that would trigger default
12. Expenses and Fees: All applicable fees, charges, and cost responsibilities
13. Governing Law: Specification of applicable Canadian jurisdiction
14. Non-Binding Nature: Statement clarifying the non-binding nature of the term sheet (except for specific provisions)
1. Guarantees: Required when personal or corporate guarantees are part of the security package
2. Syndication Rights: Included for larger loans where the lender may want to syndicate the loan
3. Prepayment Terms: When early repayment options need to be specifically addressed
4. Insurance Requirements: Detailed insurance requirements when specific coverage is essential
5. Environmental Matters: Required when the loan involves real property or businesses with environmental risks
6. Material Adverse Change: Specific provisions for market or business condition changes
7. Tax Considerations: When specific tax implications need to be addressed
8. Regulatory Approvals: When the loan requires specific regulatory clearances
1. Schedule A - Repayment Schedule: Detailed breakdown of payment amounts and dates
2. Schedule B - Security Details: Comprehensive list and description of all security to be provided
3. Schedule C - Financial Covenants: Specific financial ratios and requirements to be maintained
4. Schedule D - Permitted Liens: List of existing or permitted encumbrances on security
5. Schedule E - Draw Down Conditions: Specific conditions for loan disbursement
6. Appendix 1 - Fee Schedule: Detailed breakdown of all fees and charges
7. Appendix 2 - Required Insurance: Specific insurance requirements and coverage details
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Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Commercial Real Estate
Manufacturing
Retail
Technology
Healthcare
Construction
Agriculture
Transportation
Energy
Professional Services
Hospitality
Mining
Telecommunications
Education
Relevant Teams
Legal
Finance
Treasury
Risk Management
Credit
Corporate Banking
Commercial Banking
Business Development
Compliance
Operations
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Commercial Lending Officer
Credit Risk Manager
Corporate Lawyer
Banking Relationship Manager
Business Development Manager
Financial Controller
Corporate Banking Officer
Loan Officer
Credit Analyst
Legal Counsel
Financial Analyst
Corporate Secretary
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