Sample Venture Debt Term Sheet

Venture Debt Term Sheet

Company Name: [ABC Tech Inc.]

Lender: [Venture Lending Partners]

Summary of Principal Terms

  1. Loan Amount: The Lender agrees to provide a term loan (the “Loan”) to the Company in the principal amount of $[5,000,000] (the “Loan Amount”).
  2. Interest Rate: The Loan shall accrue interest at a per annum rate equal to [7.50]% (the “Interest Rate”), payable monthly in arrears.
  3. Maturity Date: The Loan shall have a maturity date of [36] months from the initial funding date (the “Maturity Date”).
  4. Repayment Terms: The Loan shall be repaid in [12] equal monthly installments of principal and interest commencing [12] months after the initial funding date, with the remaining balance due and payable on the Maturity Date.
  5. Origination Fee: A one-time origination fee equal to [1.00]% of the Loan Amount shall be payable to the Lender on the initial funding date.
  6. Warrants: The Company shall issue to the Lender warrants to purchase shares of the Company’s Series [X] Preferred Stock equal to [5.00]% of the Loan Amount divided by the then-current Series [X] Preferred Stock purchase price (the “Warrant Coverage”). The warrants shall be exercisable for a period of [5] years from the date of issuance.
  7. Security: The Loan shall be secured by a first priority security interest in all of the Company’s assets, excluding intellectual property, which shall be subject to a negative pledge.
  8. Covenants: The Company shall maintain the following covenants during the term of the Loan: a. Financial Reporting: The Company shall provide the Lender with unaudited quarterly financial statements and audited annual financial statements within [45] and [90] days of each fiscal period end, respectively. b. Liquidity: The Company shall maintain a minimum cash balance of $[1,000,000] at all times. c. Debt Service Coverage Ratio: The Company shall maintain a minimum debt service coverage ratio of [1.25] to [1.00]. d. No additional debt: The Company shall not incur any additional debt without the Lender’s prior written consent.
  9. Events of Default: The Loan shall become immediately due and payable upon the occurrence of any of the following events of default: (a) non-payment of any principal or interest when due; (b) material breach of any covenant; (c) bankruptcy or insolvency; (d) a change of control without Lender’s prior written consent; or (e) the occurrence of a material adverse change in the Company’s business or financial condition.
  10. Prepayment: The Company may prepay the Loan in whole or in part at any time without penalty or premium, provided that all accrued and unpaid interest is paid concurrently with such prepayment.
  11. Governing Law: This Term Sheet and all related documents shall be governed by and construed in accordance with the laws of the State of [State].

This Term Sheet is a summary of principal terms only and is not a legally binding document. The final terms of the Loan shall be set forth in definitive loan documents to be negotiated and executed by the parties. The parties shall have no obligations with respect to the Loan unless and until definitive loan documents have been executed and delivered by both parties.

Accepted and Agreed:

[ABC Tech Inc.]

[Venture Lending Partners]

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