Commercial Lending Essentials: Drafting and Negotiating Term Sheets, Proposals, and Commitment Letters

Course Description

Commercial loan term sheets, proposals and commitment letters are often the first steps involving counsel in a commercial loan transaction and are critical for setting parties’ expectations throughout the transaction. It is important for counsel to understand the differences amongst these documents, the potential risks associated with their usage and how to combat such risks. This CLE course will provide guidance on drafting, reviewing and negotiating term sheets, financing proposals and commitment letters from a lender’s counsel perspective.

Principles

• Understanding the Purpose and Legal Effect of Each Document
  • Distinguish among term sheets, financing proposals, and commitment letters, including their respective purposes, typical contents, and potential legal consequences at different stages of a commercial lending transaction.
• Drafting Clear and Comprehensive Financing Terms
  • Identify and properly document key business and legal provisions, including loan amounts, interest rates, fees, maturity dates, collateral requirements, conditions to closing, and other material financing terms.
• Recognizing and Managing Legal and Business Risks
  • Evaluate risks associated with ambiguous language, unintended binding obligations, incomplete terms, inconsistent provisions, and premature commitments, while identifying appropriate safeguards to protect the client’s interests.
• Negotiating Effective Terms and Allocating Transaction Risk
  • Apply practical drafting and negotiation strategies to address competing lender and borrower priorities, clarify obligations, establish appropriate conditions and contingencies, and reduce the potential for disputes.
• Implementing Best Practices to Protect Client Interests
  • Select the appropriate document for each stage of the transaction, clearly distinguish binding from nonbinding provisions, coordinate preliminary documents with definitive loan agreements, and use consistent review procedures to minimize legal exposure and facilitate closing.

Syllabus

1. Differences Between Term Sheets, Proposals, and Commitment Letters
2. Key Terms, Provisions, and Concepts in Each Document
3. Legal and Business Risks Associated with Each Document Type
4. Best Practices for Drafting, Reviewing, and Negotiating Loan Documents
5. Protecting Lenders and Borrowers Through Appropriate Document Selection and Risk Mitigation