How to Write a Letter of Intent (LOI) That Gets Accepted

What an LOI Does and Does Not Do

An LOI is a non-binding letter that outlines the proposed terms of an acquisition. With two important exceptions — exclusivity and confidentiality — it creates no legal obligation on either party. Either side can walk away before a definitive purchase agreement is signed.

This non-binding nature is a feature, not a bug. It lets both parties agree on the high-level framework quickly, without the time and legal expense of negotiating a full purchase agreement, before anyone knows whether the business will survive due diligence. The LOI buys you time and information at low cost.

The exclusivity provision — typically 30–45 days during which the seller cannot market the business or negotiate with other buyers — is the most valuable part of the LOI for a buyer. Without exclusivity, you could spend $15K on legal and accounting fees only to have the seller accept a competing offer on Day 29 of your diligence.

The 8 Key Sections Every LOI Needs

A well-structured LOI for a business acquisition covers the following sections.

• Purchase Price: State the proposed total purchase price clearly. If you are offering a range, anchor to a specific number with contingencies for diligence findings
• Deal Structure: Break down cash at close, SBA loan amount, seller note amount, and any equity rollover. This section is critical for setting expectations about the seller's actual day-one proceeds
• Assets vs. Equity: Specify whether this is an asset purchase or stock/equity purchase. Most small business acquisitions are asset purchases for tax reasons
• Due Diligence Period: Specify the length (typically 45–60 days) and what access you expect from the seller during this period
• Exclusivity: Length of exclusivity (30–45 days recommended), with clear language that the seller cannot market, negotiate, or accept offers from other parties during this period
• Confidentiality: Both parties agree to keep the LOI terms and all shared information confidential
• Target Closing Date: Set a realistic closing date — typically 90–120 days from LOI signing for SBA-financed deals
• Conditions to Closing: List the major conditions — satisfactory diligence, SBA approval, lease assignment, key employee retention

Anchoring Purchase Price in the LOI

Your LOI price sets the negotiating anchor for everything that follows. Start too low and you signal that you are not a serious buyer — or insult the seller into refusing to engage. Start too high and you create a price ceiling that is hard to walk back during diligence without damaging the relationship.

The right approach is to base your LOI price on your adjusted EBITDA calculation and your view of the appropriate multiple for that business's quality profile. Use the EBITDA Valuation Estimator to establish a credible range before you write the LOI. Then offer at the low-to-mid end of that range, with a brief explanation of your reasoning, and leave room to move up if diligence confirms the seller's representations.

Avoid offering a wide range in the LOI (e.g., "$2M–$2.8M"). It signals uncertainty and gives the seller permission to hold out for the top of the range. A specific number with a clear rationale — even if slightly below the seller's ask — is more credible and more likely to start a real conversation.

Deal Structure Language in the LOI

The deal structure section of your LOI is where sophisticated buyers differentiate themselves. Sellers evaluate LOIs not just on price — but on how much cash they will receive at close, how the seller note is structured, and whether they will have ongoing liability through escrow holdbacks or earnouts.

For a clean deal with stable financials and an SBA-financed buyer, a typical structure might be: 85% of purchase price funded by SBA loan (up to $5M maximum), 5–10% seller note on standby for 24 months, and 5–10% buyer equity injection at close. Communicate this clearly so the seller understands that the seller note is a real obligation — not a soft promise — and that payments will begin on a specific schedule.

For more complex deal structures, see the Deal Structure Builder to model different combinations of cash, SBA financing, and seller notes — and understand the resulting monthly debt service and DSCR before the LOI goes out.

Exclusivity — How to Negotiate the Right Terms

Exclusivity is the section sellers push back on most. A motivated seller will resist a long exclusivity period because it takes the business off the market while they wait for your diligence to complete. Your job is to make exclusivity feel safe — by being specific about what you will do during the exclusivity period and when.

Propose 45 days of exclusivity for a straightforward deal. Include milestones: financial review by Day 14, management interviews by Day 25, final report by Day 38. This shows the seller you have a plan and you intend to execute it — not use exclusivity as free optionality.

For SBA-financed deals, 45 days is often too short. SBA underwriting alone can take 4–6 weeks. Ask for 60 days of exclusivity with a 15-day extension right if the SBA process is still in progress.

What Happens After the LOI Is Signed

Once the LOI is signed, the exclusivity clock starts. You have a defined window to complete diligence, finalize financing, and negotiate the definitive purchase agreement. Use it efficiently.

Send your due diligence request list within 48 hours of LOI signing. Engage your M&A attorney and CPA immediately — do not wait for the seller to provide documents before putting your advisors on notice. If you are using SBA financing, submit your lender application as soon as you have the signed LOI in hand.

The LOI-to-close phase is where deals die most often — not from failed diligence, but from poor project management. Create a shared deal timeline with all parties. Track open items daily. And communicate proactively with the seller about progress. Sellers who feel informed and respected are far more likely to work through diligence challenges than sellers who feel ignored.

See our industry-specific LOI guides for HVAC businesses and septic services to understand how LOI terms vary by industry.