Virgin Islands Senior Debt Term Sheet
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How to fill out Senior Debt Term Sheet?
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FAQ
VC term sheets typically include the amount of money being raised, the types of securities involved, the company's valuation before and after the investment, the investor's liquidation preferences, voting rights, board representation, and so much more.
Covenants: A Promise of Performance If you accept venture debt financing with a covenant arrangement, you may be required to maintain a certain level of new subscribers or monthly recurring revenue while also keeping your burn and churn rates down. These metrics might be evaluated on a monthly or quarterly basis.
Examine the financial terms specified in the term sheet. Pay close attention to the valuation, investment amount, and the type of funding being offered, whether it is equity, debt, or a combination. Analyze any provisions related to future financing rounds, including pre-emption rights and anti-dilution clauses.
Elements of a Term Sheet General Information. The top of a term sheet will outline general information such as the company name, investor name, date, and currency of the transaction. Amount. This section provides the amount of funding the investor and investee have tentatively agreed upon. ... Structure. ... Interest Rate.
Most venture debt takes the form of a growth capital term loan. These loans usually have to be repaid within three to four years, but they often start out with a 6- to 12-month interest-only (I/O) period. During the I/O period, the company pays accrued interest, but not principal.
Key Takeaways Start by making sure you're working with an investor that's right for you; then look at all the terms ? not just valuation. Make sure you understand critical elements like liquidation preferences, the options pool and board seats. VCs are experts and negotiation pros.
If you are, you might see a term sheet soon. This is a nonbinding agreement that a venture debt lender will give you when they're considering an investment in your company. This sheet will set the terms of your deal, including the size of your loan, your interest rate, and the warrants that your lender will take.
The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.
Venture debt is a term loan typically structured over a four-to-five-year amortization period, usually with a period of time to draw the loan down, such as 9-12 months. Interest-only periods of 3-12 months are common.
First, clarify how much funding you need and what you'll use it for, then identify your non-negotiables, then go line by line in each of the venture debt term sheets you've received to compare apples-apples, then kick off the negotiation process ensuring that you engage legal counsel, and finally sign the term sheet ...