Business Term Sheet Templates and How to Use Them
The business term is necessary to ensure both parties understand what they obtain. In this situation, a new company or startup often looks for investors that are capable to support business for a longer period. In order to make the term to be official, both use business term sheet templates and change them into the proper documents.
Understanding the Business Term
The template contains an outline regarding how the business terms should be written. You are familiar with the term of agreement when registering on the website. That example is enough to represent what business term supposed to be. It has a long list of everything, such as capital, business model, legal aspects, ownership, stock, liquidation, liability, loan, sales figure, and anything.
The term on those templates is the only a sample. In fact, you must change and modify based on your business model. The investor has the right regarding this term. More explanations related to business term sheet templates will be explored in the following list.
- Business valuation
The term explains and calculates valuation regarding the business itself. As you know, people invest because they see the value in the company.
- Stocks and voting right
One important thing in the business term sheet is a stock option and voting right. Both are side by side that investors and founders negotiate in order to meet the same agreement. Voting right is useful when the business requires a significant decision.
- Information availability
A private company has a privilege not exposing or sharing financial information. However, the situation is different when the business wants more money from the investor. The information availability should be considered important for business terms.
The Templates for Business Term Sheet
The next section gives some examples you can choose for business term sheet templates. The term must accommodate all aspects before the agreement. Each template is for certain business models. You can edit and modify it easily.
- Simple sheet
- Startup business sheet
- Venture capital sheet
- Biotech business sheet
- Investor business term
- Small business term
Business Contract and Legal Binding
One important thing when discussing business terms is whether anything on a term will be legally binding or not. This is a sensitive situation that might lead to big trouble in the future if you do not have a contingency plan. In business, every party has an equal level before legally signed into a contract. On the other side, the business term is mostly only agreement between investor and founder.
As you can see, the term gives rules and some regulations about what business should be. The investor expects profit, and the founder wants the business to be growth. Both have the same term that will be added to a business sheet. Unfortunately, the situation is not as simple as making a handshake. The agreement does not have legal binding. You may agree, but do not know if another party can keep that way.
For protection, the business term sheet is mostly signed as a contract. Lawyers from both sides will make this contract to be a legal document. If something happens, everyone can use a contract for resolution. The investors want money in proper hand and management. For founder, the contract protects from unexpected situations when the business does not go as it supposed to be. That’s an important part of business term sheet templates.