A Letter of Intent (LOI) is a mostly non-binding offer to buy a business. You send it after a first look at the numbers but before spending money on due diligence. It states the price, whether you're buying assets or stock, how you'll finance it (usually an SBA loan), how long you need for diligence, and that the seller agrees not to shop the deal to anyone else while you work.
Only a few parts of an LOI are meant to bind, confidentiality, exclusivity, and who pays expenses. Everything else is a framework you'll turn into a binding purchase agreement later.
When you use an LOI in a business acquisition
You send an LOI once you've reviewed the seller's high-level financials, agree on a rough price, and want to move to serious diligence. It does three jobs: it shows the seller you're a real buyer, it gets you exclusivity so they stop taking other offers, and it aligns both sides on the deal's shape before lawyers and lenders get involved. Getting the structure right here saves weeks later. If you haven't priced the deal yet, run it through the valuation calculator and DSCR calculator first.
How to read the template
Anything in [square brackets] is a placeholder for you to fill in. The template is written for an asset purchase financed with an SBA 7(a) loan, which is the most common structure for a Main Street acquisition, swap in stock-purchase or all-cash language where noted.
The Letter of Intent template
LETTER OF INTENT
Non-Binding, For Discussion Purposes Only
Date: [Date]
To: [Seller Name], Owner of [Target Business Legal Name]
From: [Buyer Name / Buyer Acquisition Entity, LLC]
Re: Proposed acquisition of [Target Business Name] ("the Business")
Dear [Seller Name],
Thank you for the opportunity to learn about [Target Business Name]. This Letter of Intent ("LOI") outlines the principal terms on which [Buyer Name] ("Buyer") proposes to acquire the Business from [Seller Name] ("Seller"). Except for the sections expressly stated to be binding in Paragraph 12, this LOI is non-binding and is intended only as a framework for negotiating a definitive purchase agreement.
1. Parties
Buyer: [Buyer full legal name, or the acquisition entity to be formed, e.g., "Newco Acquisition LLC, a [State] limited liability company"].
Seller: [Seller full legal name and, if applicable, the legal entity that owns the Business, e.g., "[Company], Inc., a [State] corporation"].
2. The Business
The Business operates as [describe: e.g., "an HVAC service and installation company"] located at [address / service area], operating under the name [DBA / trade name]. The transaction contemplates the acquisition of the Business as a going concern, including its operations, goodwill, and the assets described in Paragraph 4.
3. Purchase Price
The proposed total purchase price is $[Purchase Price] (the "Purchase Price"), on a cash-free, debt-free basis, assuming a normalized level of net working capital to be delivered at closing. The Purchase Price is based on the financial information provided to date and is subject to confirmation through due diligence.
4. Deal Structure
The transaction is proposed as an asset purchase. Buyer will acquire substantially all of the operating assets of the Business, including equipment, inventory, customer lists and relationships, contracts, intellectual property, phone numbers, websites, domain names, and goodwill. Buyer will not assume any liabilities except those specifically identified and agreed in the definitive agreement (e.g., assumed contracts and post-closing obligations).
[Alternative, stock purchase: "The transaction is proposed as a purchase of 100% of the issued and outstanding equity of [Company]. Buyer will acquire the Business subject to its existing liabilities as disclosed and verified in due diligence."]
5. Consideration & Financing
Buyer proposes to fund the Purchase Price as follows:
| Source | Amount | Notes |
|---|---|---|
| Buyer equity (down payment) | $[Amount] | [e.g., 10% of project cost] |
| SBA 7(a) loan | $[Amount] | Subject to lender approval |
| Seller note (on full standby) | $[Amount] | See Paragraph 6 |
| Total | $[Purchase Price] |
Buyer intends to finance the acquisition primarily through a U.S. Small Business Administration (SBA) 7(a) loan. This LOI and any resulting agreement are expressly contingent on Buyer obtaining SBA loan approval on commercially reasonable terms (see Paragraph 8).
6. Seller Financing
Seller agrees to provide a seller note in the amount of $[Amount], at [Rate]% interest, amortized over [Term] years, on full standby for the first [24] months (no principal or interest payments during the standby period) to satisfy SBA equity-injection requirements. Final terms will be set out in a seller note and security agreement. See our seller note term sheet template for the detailed terms.
7. Earnest Money / Good-Faith Deposit
Upon execution of a definitive purchase agreement, Buyer will deposit $[Amount] in earnest money into escrow with [escrow agent / attorney trust account], to be credited toward the Purchase Price at closing and refundable to Buyer if the transaction fails to close for any reason other than Buyer's uncured default.
8. Due Diligence
Buyer will have a due diligence period of [45 to 60] days from the date this LOI is signed (the "Diligence Period") to review the Business's financial, legal, operational, tax, and other records. Seller will provide reasonable access to books, records, contracts, personnel, and premises. Buyer's obligation to proceed is contingent on completing diligence to Buyer's reasonable satisfaction. Use our due diligence checklist to run this stage.
9. Contingencies
Closing is contingent upon: (a) Buyer's satisfactory completion of due diligence; (b) Buyer obtaining SBA financing on commercially reasonable terms; (c) a satisfactory business valuation acceptable to the lender; (d) transfer or assignment of all material licenses, permits, and contracts, including the premises lease; and (e) negotiation and execution of a mutually acceptable definitive purchase agreement and related documents.
10. Exclusivity / No-Shop
In consideration of the time and expense Buyer will incur, Seller agrees that for a period of [60 to 90] days from the date this LOI is signed (the "Exclusivity Period"), Seller and its representatives will not solicit, encourage, or entertain any offer, inquiry, or proposal from any other party regarding a sale, merger, or transfer of the Business or its assets, and will not provide information to or negotiate with any other prospective buyer. This Paragraph is binding.
11. Transition & Seller Support
Seller agrees to provide a reasonable post-closing transition, estimated at [30 to 90] days, to transfer relationships, systems, and operating knowledge. Terms of any consulting arrangement or non-compete will be set out in the definitive agreement. See our 90-day transition plan and non-compete template.
12. Binding & Non-Binding Provisions
Except for Paragraph 10 (Exclusivity), Paragraph 13 (Confidentiality), Paragraph 14 (Expenses), and Paragraph 16 (Governing Law), which are binding and enforceable, this LOI is a statement of intent only and creates no binding obligation on either party to complete the transaction. No such obligation will arise unless and until a definitive purchase agreement is executed by both parties.
13. Confidentiality
Each party will keep the existence and terms of this LOI, and all information exchanged, strictly confidential and will not disclose it to any third party except its attorneys, accountants, lenders, and advisors on a need-to-know basis, or as required by law. This Paragraph is binding.
14. Expenses
Each party will bear its own costs and expenses (including legal, accounting, and advisory fees) in connection with this transaction, whether or not it closes. This Paragraph is binding.
15. Proposed Closing Timeline
The parties will work in good faith to sign a definitive purchase agreement within [30] days of this LOI and to close within approximately [90 to 120] days of signing this LOI, subject to SBA financing timelines and satisfaction of the contingencies above.
16. Governing Law
This LOI will be governed by the laws of the State of [State], without regard to its conflict-of-laws rules. This Paragraph is binding.
17. Expiration of this Offer
This offer will expire if not signed and returned by Seller on or before [Expiration Date / time], after which it may be withdrawn by Buyer without further notice.
Sincerely,
_______________________________
[Buyer Name], [Title]
[Buyer Entity]
Agreed and accepted:
_______________________________
[Seller Name]
Date: ____________
How to use this template
- Fill in every bracket. Don't send an LOI with placeholders, sellers read that as an inexperienced buyer. Get the price, structure, and financing plan nailed down first.
- Decide asset vs. stock. Most SBA-financed Main Street deals are asset purchases (cleaner liability profile, tax step-up for you). Use the stock alternative only when there are non-transferable contracts, licenses, or tax reasons, and get advice.
- Set a realistic exclusivity window. SBA approval commonly takes 60 to 90 days, so ask for enough time to actually get to close.
- Keep the binding parts tight. Confidentiality, exclusivity, and expenses should bind; the price and terms should not. Make that split explicit so no one argues later that the whole LOI was a contract.
- Have your attorney review it before it goes out. An LOI can accidentally create binding obligations if worded loosely.
Pair it with the numbers
Before you name a price, confirm the deal covers its debt in the DSCR calculator and that you can afford it in the max purchase price calculator. A clean LOI backed by real math is what gets sellers to say yes.
This template is an educational starting point, not legal advice. An LOI can create binding obligations depending on how it's written, and requirements vary by state and deal. Have a qualified M&A attorney review and adapt it before you sign or send it.
Frequently asked questions
Most of it isn't. Price and terms are a non-binding framework. But specific clauses are usually made binding on purpose, confidentiality, exclusivity/no-shop, and who pays expenses. Always state clearly which sections bind and which don't, as this template does in Paragraph 12.
Use an LOI. It's far cheaper to align on price and structure in a two-page letter than to have lawyers draft a full purchase agreement only to discover you disagree on the basics. The LOI also gets you exclusivity so the seller stops taking other offers while you run diligence.
30 to 90 days is typical for a small business. Because SBA loan approval often takes 60 to 90 days, ask for enough runway to complete diligence and get financing without racing the clock.
They're close cousins. An LOI is usually a letter that reads in prose and covers the full deal; a term sheet is a bulleted list of the key economic terms. Many buyers use an LOI for the acquisition and a separate term sheet for the seller financing inside it.
Related guides & templates
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Last updated: July 2026 · Reviewed by the Acquisition Ace team