Indicative Terms, Credit Approval and Written Offers: Understanding the Difference

Funding discussions often use similar language for very different stages. An expression of interest, an indicative term sheet, approval in principle and a formal written offer do not carry the same weight. Using accurate status language helps management plan sensibly and prevents suppliers, vendors or shareholders from acting on a transaction that remains conditional.

Initial interest

A lender or investor may confirm that an opportunity appears to fit its broad criteria and request further information. This is useful market feedback, but it is not approval and may be based only on a short summary. At this stage the amount, pricing, security and structure can change materially after detailed review.

Indicative terms

Indicative terms describe a possible structure based on stated assumptions. They are normally non-binding, subject to due diligence, valuation, legal review, credit approval, documentation and satisfactory verification of the information supplied. Read the conditions carefully: a headline loan amount may include rolled-up interest or fees, and the net proceeds may be lower.

Internal credit or investment approval

A proposal may need committee approval before an offer is issued. Approval can be conditional and may expire if information changes, a valuation is lower than expected or the transaction is not completed within a specified period. Charter HCP does not make a third-party lender's or investor's decision and should not describe a proposal as approved unless that status is confirmed in writing.

Written offer and documentation

A written offer is more advanced, but it will still contain conditions. These may include satisfactory legal due diligence, security perfection, insurance, equity contribution, repayment of existing creditors, customer consents or updated financial information. Independent legal advice is essential before signing or relying on it.

Completion and drawdown

A transaction completes only when the documents are executed, conditions are satisfied or waived, security is put in place and funds are released in accordance with the agreed mechanics. Even then, later drawdowns may remain subject to further conditions.

Practical planning

Maintain a conditions tracker with the requirement, evidence, owner and deadline. Avoid making irreversible commitments based solely on indicative terms, and keep contingency for valuation, legal and timing changes. Clear language does not make a process slower; it allows each party to understand what has actually been achieved and what remains outstanding.

Understand the funding process. Send Charter HCP a high-level summary of the business, proposed transaction, funding requirement and intended repayment or exit, and a member of the team will confirm whether the opportunity falls within Charter HCP's scope.