Along with your letter of intent, the term sheet facilitates an understanding between founders and investors as to what’s expected regarding debt vs. equity considerations, BOD participation, liquidation preference, future financing and valuation, and what the parties can anticipate in the event that the company is acquired prior to a loan’s maturity. While a term sheet is more than just a handshake, it is still not a financing commitment. It – along with your negotiation – sets a tone, so make it a positive one.
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