How to read a term sheet without a law degree.

1. Total cost of capital, not the rate

Start at the bottom: how many dollars leave the business over the life of the loan, fees included. Two offers with identical rates can differ by thousands once origination fees, doc fees, and required insurance are added. Any term sheet we present shows this number first; if a sheet from elsewhere doesn't, compute it before reading further.

2. APR vs. interest rate

The interest rate prices the principal; APR folds in the fees. The gap between them tells you how fee-heavy the offer is. A 9% rate with 4 points of fees on a two-year term is a worse loan than 11% clean.

3. Prepayment language

Three flavors: true open prepayment (pay early, save the remaining interest), step-down penalties (5%/3%/1% by year), and fixed-cost structures where early payoff saves nothing. On a five-year facility you might exit in year two, this clause is worth more than half a point of rate.

4. The personal guarantee, exactly

Standard, but read what it covers. An unlimited PG on the full balance is normal. A PG plus a lien on specifically named personal assets is not standard for most products, and deserves a question.

5. Covenants and triggers

Look for minimum balance requirements, debt service coverage covenants, and "material adverse change" clauses that let the lender call the loan. Rare in small-balance lending, common above $1M. Know which events give the lender options.

6. What's actually secured

A blanket UCC-1 on business assets is normal. Check whether it's first or second position, and whether it conflicts with existing filings — equipment lenders and bonding companies care about lien order, and an avoidable conflict here can hold up an otherwise-done deal.

7. Funding conditions

The list of items between signature and wire: insurance certificates, landlord waivers, payoff letters. Ask for the complete list on day one. "Approved" with eight open conditions is not funded.