The short answer: An IOI (Indication of Interest) is an early, informal, non-binding note that offers a price range to gauge fit. An LOI (Letter of Intent) comes later, proposes specific terms, and usually includes a binding exclusivity clause that starts due diligence. The IOI opens the conversation; the LOI commits both sides to one deal. Many small-business buyers skip the IOI and go straight to an LOI.
What an IOI is
An Indication of Interest is a buyer's first written signal that they're serious enough to talk terms. It is deliberately light: a valuation range rather than a fixed price, a general sense of structure, and any high-level conditions, but no exclusivity and no binding commitment. Sellers and brokers use IOIs to sort genuine buyers from tire-kickers, especially when several buyers are circling the same business.
What an LOI is
A Letter of Intent is the next step up. By now the buyer has seen more information and can propose a specific price, a defined deal structure, and real terms. Crucially, the LOI usually carries a binding exclusivity (no-shop) clause, the seller agrees to stop entertaining other offers so the buyer can safely spend money on diligence. That single clause is the biggest practical difference between the two documents.
The IOI asks "are we in the same ballpark?" The LOI says "take it off the market, we're doing this."
IOI vs LOI, side by side
| Dimension | IOI | LOI |
|---|---|---|
| Stage | Early, first serious signal | Later, after preliminary info |
| Price | A range | A specific number |
| Detail | High-level, brief | Detailed terms and conditions |
| Exclusivity (no-shop) | No | Usually yes (binding) |
| Binding provisions | Rare, fully non-binding | Some (exclusivity, confidentiality, expenses) |
| Common in | Larger / multi-bidder processes | Nearly every serious deal |
| What it triggers | Access to more information | Due diligence begins |
Which one do you use?
For most Main Street and lower-middle-market deals, buyers move straight to an LOI, the IOI step adds little when it's a one-on-one negotiation. You're more likely to write an IOI when:
- A broker or investment banker is running a competitive process and asks for IOIs to shortlist buyers.
- The business is larger and you want to signal interest before investing in a detailed offer.
- You've seen only a teaser or CIM and can't yet commit to a specific price.
Rule of thumb
If there's competition and you're still gauging fit, an IOI keeps you flexible. Once you're the chosen buyer and ready to spend on diligence, you want an LOI with exclusivity, that's what protects your money.
Either way, price off real numbers
Whether you send a range in an IOI or a fixed figure in an LOI, ground it in a real valuation, not the seller's ask. Use the valuation calculator and our valuation guide to set a number you can defend once diligence begins, and factor in how you'll finance it via an SBA loan.
Ready to write the LOI?
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Frequently asked questions
An IOI is an early, informal, non-binding note offering a price range to gauge fit. An LOI comes later, proposes specific terms, and usually includes a binding exclusivity clause that starts due diligence. The IOI opens the conversation; the LOI commits both sides to one deal.
No, it's non-binding by design. It offers a valuation range rather than a fixed price and has no exclusivity, so both sides can keep talking to others. Its job is to filter for serious, aligned buyers before anyone spends on diligence.
No. Many small-business buyers go straight to an LOI. IOIs are more common in larger or broker-run processes with multiple bidders, where the seller uses them to shortlist before granting one buyer an exclusive LOI.
Usually not, it offers a range, because it's submitted before real diligence. The LOI narrows that to a specific proposed price once the buyer has seen more information.
Sources
- IOI vs LOI definitions and process stage, BizBuySell, DueDilio (2025 to 2026).
