A Letter of Intent (LOI) is a mostly non-binding document that outlines the proposed price, deal structure (asset vs stock), financing, and timeline for buying a business. Its binding parts are usually only exclusivity and confidentiality; the rest is a framework the definitive purchase agreement later formalizes.
What an LOI pins down
- Price & structure: e.g. $945,000, asset sale, cash-free/debt-free
- Deposit & financing: SBA 7(a), 10% equity injection
- Seller note: $50,000 on full standby
- Exclusivity: 60 to 90 days of no-shop (binding)
- Working capital: a peg to be delivered at close
Signing it starts diligence and the SBA clock.
Why it matters when buying a business
The LOI sets the anchor for everything that follows, renegotiating price later is far harder than getting it right here. Exclusivity stops the seller from shopping your offer, and the structure you name drives your taxes and SBA eligibility. Pair it with a strong QoE so the price survives diligence.
