Is a lender’s term sheet binding?
Usually not on the part you care about, because a term sheet is normally indicative and sets out what a lender is prepared to consider rather than what it has agreed to lend. Some clauses can still bind you, particularly confidentiality, exclusivity and costs. Formal approval and a signed facility agreement are what commit the lender, so read the document for what it does not promise as closely as you read the numbers in it.
What a term sheet does
It puts the shape of the deal on paper, the amount, the likely rate, the term, the security and the main conditions. That is genuinely useful, because it gives you something to compare against another lender and something to take to your accountant. Most term sheets say plainly that they are subject to credit approval, valuation and documentation. Read that line rather than skipping it. It is the difference between a lender saying this looks fundable and a lender saying we will fund it.
The parts that can bind you
Exclusivity clauses stop you talking to other lenders for a set period, which matters if you are running a competitive process. Fee and cost clauses often survive even where the loan never settles, so you can end up paying for a valuation or legal work on a deal that falls over. Expiry dates apply as well. If any of it looks heavy, ask before you sign. Have your solicitor read the whole document where the transaction is a large one.
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Last updated 15th July 2026. Reviewed by Authorised Credit Representative 554584 of Australian Credit Licence 414426.