A private credit term sheet is not a “ballpark.” It is the first draft of your future obligations, control package, and closing friction. Borrowers often fixate on headline pricing and miss the real economics buried in OID, call protection, reporting burdens, and lender controls. This checklist is built to help you read a private credit term sheet like a credit committee would.
| Term Category | Checklist Questions |
|---|---|
| Facility & Structure | What is it: term loan, revolver, delayed draw, unitranche, or a borrowing base facility? Is it committed or best efforts? Is there a draw period? What is the final maturity, and is there amortization or a bullet? Are there mandatory prepayments tied to asset sales, insurance proceeds, excess cash flow, or equity issuance? |
| Pricing | What is the interest basis (base rate, reference rate, fixed rate), and is there a floor? Is pricing cash-pay only, or does it include PIK, PIK toggle, or paid-in-kind components? Is there step-up pricing on covenant breaches, rating triggers, or utilization? What is default interest and when does it apply? |
| OID & Upfront Economics | What is OID and how is it applied (net funded proceeds versus paid at close)? Are there arrangement fees, underwriting fees, closing fees, ticking fees, or commitment fees? Are lender expenses capped, and who pays third-party diligence and legal costs? Is there an exit fee or end-of-term fee? |
| Prepayment & Call Protection | Is there a hard call period? Is it a soft call with declining premiums? Are make-whole provisions included, and under what triggers? Are there restrictions on refinancing with a competitor lender within a period? |
| Collateral & Guarantees | Is the loan secured or unsecured? First lien, second lien, or split collateral? Which entities guarantee the facility? Are there foreign guarantors? Are there collateral exclusions, permitted liens, and a clear security perfection plan? Is there cash dominion, a lockbox, blocked accounts, or a controlled waterfall? |
| Financial Covenants | Which covenants apply: leverage, interest coverage, fixed charge coverage, minimum liquidity, minimum EBITDA, minimum net worth? Are they maintenance covenants or incurrence tests? How much headroom exists under your base case and a downside case? Are there cure rights (equity cure), and what are the limits? |
| Negative Covenants | What are the limits on additional debt, liens, asset sales, and investments? Are restricted payments limited (dividends, distributions, management fees)? What are the baskets for acquisitions, capex, and affiliate transactions? Are there change of control triggers or ownership restrictions? |
| Reporting & Monitoring | How often are financials required: monthly, quarterly, audited annually? Is a compliance certificate required, and who must sign? Are budgets, variance reports, KPI reporting, or borrower base certificates required? Are field exams, appraisals, audits, or collateral verification required, and at whose cost? |
| Conditions To Close | What third-party reports are required: QoE, appraisal, environmental, legal opinions, insurance reviews? Are there minimum liquidity, minimum EBITDA, or leverage conditions at closing? Are there any “lender discretion” clauses that can re-open credit approvals late? |
| Events Of Default | What are the typical triggers: payment default, covenant breach, MAE clauses, cross-default, judgments, ERISA, sanctions, fraud? What cure periods exist, and what are the remedies? Do controls tighten automatically upon default or “cash sweep” triggers? |
| Assignment & Transfers | Can the lender freely assign or syndicate? Are there borrower consent rights? Are competitors excluded? Are there restrictions on transfers to distressed funds? Are there confidentiality and information sharing provisions you can live with? |
OID is not “small.” It changes proceeds at close and increases your effective cost of capital. If you refinance early, OID and call protection can make the all-in cost painful even if the headline rate looks acceptable.
Commitment fees, unused line fees, ticking fees, agency fees, and lender expense reimbursement are often overlooked. If you are using the facility intermittently, the “unused” economics still matter.
Most private credit term sheets give the lender a control path if performance slips. That can be fair. The problem is when the control package is not aligned to your business model or reporting capacity. The right approach is to negotiate clarity, frequency, and triggers before documentation starts.
If you are evaluating multiple lenders, create a one-page comparison matrix that forces decisions. A disciplined matrix prevents negotiation fatigue and stops the team from chasing cosmetic “wins” that do not change outcomes.
| Row | What To Capture In One Line |
|---|---|
| All-In Economics | Interest basis, floor, OID, fees, call protection, exit fees, expected hold-period cost |
| Closing Friction | Third-party reports, approvals, conditions precedent, “lender discretion” clauses |
| Control Package | Collateral, cash management, reserves, lockbox, triggers, step-in rights |
| Covenants | Maintenance versus incurrence, headroom, definitions, cure rights |
| Reporting | Frequency, certificates, audits, appraisals, field exams, cost allocation |
| Flexibility | Acquisition baskets, capex limits, restricted payments, refinancing restrictions, transfer limitations |
AI can speed up review, but it should not be your decision-maker. The clean approach is to use AI to extract terms into a structured checklist, then validate every number and definition against the source document. This cuts cycle time and reduces missed items, while keeping accountability in-house.
Financely supports borrowers, sponsors, and acquirers by converting lender proposals into a decision-grade comparison, identifying negotiation levers, and coordinating a controlled process that leads to executable terms. We focus on lender-grade packaging, clarity on controls and reporting, and a closing path that does not collapse under diligence.
If you are reviewing a private credit term sheet, share the term sheet (or key terms), your financials, sources and uses, collateral summary, and timeline. We will revert with a structured comparison, negotiation priorities, and next steps.
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