I am looking into purchasing a veterinary practice and the commercial real estate. I was given the following term sheet. I do not have much experience with term sheets and was wondering if these are reasonable terms.
Loan Program: SBA 7a Loan
Loan Amount: 1.2 Million
Loan Sources & Uses: Practice and Realestate, Working Capital, Soft Costs
Equity injection: $20,000 (for real estate earnest money)
Earnest money deposit: $1,000
Interest rate: WSJ Prime Rate plus 2% (6% as of 5/16/17) to adjust quarterly on the loan
Amortization: 25 year term fully amortized
Repayment terms: 300 monthly estimated principal & interest payments $8,106
Prepayment penalty: 5% in year 1, 3% in year 2, 1% in year 3 and non thereafter. Borrower may make a principal reduction of up to 20% per year without triggering prepayment penalty.
Collateral: First lien on commercial real estate. First lean on assets of the practice.
Any thoughts, help, advice are appreciated!