a term sheet is a nonbinding agreement that shows the basic terms and conditions of an investment it is 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 contract that conforms to the term sheet details is drawn up 
uses of a term sheetthe term sheet should cover the significant aspects of a deal without detailing every minor contingency covered by a binding contract this helps ensure the parties in a business transaction agree on most major aspects while reducing the likelihood of a misunderstanding this in turn could avoid costly legal challenges later on all term sheets contain information on the assets the initial purchase price any contingencies that may affect the cost a time frame for a response and other important information term sheets are most often associated with startups entrepreneurs find this document crucial for investors often vcs who may offer capital to fund startups a term sheet used as part of a merger or attempted acquisition typically contains information about the initial purchase price the preferred payment method and the assets included it might also have information about what if anything is excluded from or must be part of the deal for one or both parties 