A step-by-step LOI guide built for appliance retail acquisitions — covering inventory, vendor agreements, service contracts, and SBA deal structures in the $1M–$5M revenue range.
An LOI (Letter of Intent) is the foundational document in any appliance store acquisition. It establishes the agreed-upon price, structure, and key conditions before expensive legal and due diligence work begins. For appliance store buyers, the LOI is especially critical because the deal involves moving parts that most retail acquisitions don't: floor plan financing obligations, extended warranty liabilities, vendor dealer authorizations, and delivery fleet assets — all of which must be addressed before you reach a purchase agreement. In the lower middle market, appliance store deals typically close between 2.5x–4x SDE, often using SBA 7(a) financing with a seller note bridging the equity gap. Your LOI needs to protect your ability to unwind the deal if vendor relationships can't be transferred, if inventory is older than disclosed, or if warranty obligations exceed actuarial estimates. This guide and template walks you through every section of a well-drafted appliance store LOI, with example language and negotiation notes specific to independent appliance dealer acquisitions.
Find Appliance Store Businesses to AcquireParties and Transaction Overview
Identifies the buyer entity, seller, and the target business. Specifies whether the transaction is structured as an asset purchase or stock purchase — critical for appliance stores where floor plan debt, warranty liabilities, and tax exposure make asset purchases far preferable for buyers.
Example Language
This Letter of Intent ('LOI') is entered into by [Buyer Legal Entity Name] ('Buyer') and [Seller Legal Name] ('Seller'), the owner(s) of [Business Name], an independent appliance dealership operating at [address] ('the Business'). The parties intend to pursue an asset purchase transaction, whereby Buyer will acquire substantially all operating assets of the Business, excluding accounts payable, floor plan financing obligations, and undisclosed warranty liabilities, unless otherwise agreed during due diligence.
💡 Always push for an asset purchase structure. Stock purchases expose you to legacy warranty claims, vendor disputes, and floor plan debt. Sellers may prefer stock sales for tax reasons — be prepared to offer a modest price premium in exchange for an asset deal, which is almost always worth it in appliance retail.
Purchase Price and Valuation Basis
States the proposed purchase price, the multiple applied to SDE or EBITDA, and how the price was derived. For appliance stores, this section should distinguish between business goodwill/FF&E and inventory, which is typically purchased separately at cost.
Example Language
Buyer proposes a total acquisition price of $[X], comprised of (a) $[X] for business goodwill, customer relationships, vendor authorizations, and FF&E including delivery fleet and showroom fixtures, representing approximately [2.5x–3.5x] trailing twelve-month Seller's Discretionary Earnings ('SDE') of $[X], and (b) inventory purchased separately at cost, to be determined by a joint physical count and aging review completed no later than five (5) business days prior to closing. Inventory older than 180 days shall be subject to a negotiated markdown of [10–30]% from cost.
💡 Never roll inventory into the goodwill multiple. Insist on a separate inventory purchase at cost, with an aging schedule that discounts old stock. Sellers often carry display models and discontinued SKUs that look good on the balance sheet but move slowly. Build in the right to reject inventory that has been damaged, is manufacturer-discontinued, or has outstanding floor plan charges exceeding its market value.
Deal Structure and Financing
Outlines the proposed financing structure, including SBA loan amount, buyer equity injection, seller note terms, and any earnout provisions tied to vendor relationship continuity or customer retention.
Example Language
Buyer intends to finance the acquisition using an SBA 7(a) loan of approximately $[X], representing [75–80]% of the total transaction value, with a buyer equity injection of [10–15]% and a seller note of [10–15]% of the purchase price at [6–7]% interest, payable over [3–5] years. The seller note shall be subordinated to the SBA loan and subject to a standby period of up to 24 months as required by SBA lender. An earnout of up to $[X] may be structured, payable over 24 months, contingent on (a) successful transfer of all major vendor dealer authorizations and (b) retention of the top 20 commercial accounts generating more than 30% of annual revenue.
💡 SBA lenders will require the seller note to stand by during the first 24 months of the loan. Make sure the seller understands this before the LOI is signed — surprises here kill deals. The earnout tied to vendor transfer is a legitimate protection: if the Whirlpool or GE dealership authorization doesn't transfer, the business is fundamentally different than what you priced.
Inventory and Floor Plan Obligations
Specifies how existing inventory will be valued, how floor plan financing will be handled at closing, and which party is responsible for outstanding manufacturer financing obligations.
Example Language
Seller shall provide Buyer with a complete inventory list including SKU, purchase date, cost, retail price, floor plan lender, and outstanding balance no later than [15] business days following execution of this LOI. All floor plan financing balances owed to [lender name(s)] shall be paid in full by Seller at or before closing from proceeds of the sale. Buyer assumes no liability for pre-closing floor plan obligations. Buyer shall have the right to conduct a joint physical inventory count within [10] business days of receiving the inventory list, and may exclude from the purchase any items determined to be obsolete, damaged, or subject to manufacturer recall.
💡 Floor plan financing is one of the most common deal-killers in appliance store acquisitions. Sellers sometimes forget that floor plan balances reduce their net proceeds substantially. Walk through the math with the seller early: purchase price minus floor plan payoff minus broker fee equals what they actually take home. This prevents resentment at closing.
Vendor Agreements and Dealer Authorizations
Addresses the transfer of manufacturer dealer authorizations, distributor agreements, and preferred pricing arrangements — the core competitive assets of an independent appliance dealer.
Example Language
Buyer's obligation to close is conditioned upon Seller's written confirmation from the following manufacturers and distributors that dealer authorizations will be transferred to Buyer or reissued in Buyer's name under equivalent terms: [Whirlpool, GE Appliances, LG, Samsung, Bosch, and any other brand generating more than 5% of annual revenue]. Seller shall use commercially reasonable efforts to introduce Buyer to all manufacturer regional representatives, distributor credit managers, and key vendor contacts within [20] business days of LOI execution. Failure to secure transfer of any major brand authorization shall entitle Buyer to renegotiate the purchase price or terminate this LOI without penalty.
💡 Vendor authorization transfer is not guaranteed. Manufacturers like Whirlpool and GE have approval processes for dealer transfers and reserve the right to deny or delay authorization. Some will want to meet the buyer, review financials, or require a new dealer agreement. Start this process immediately after LOI signing — it often takes 30–60 days and can become a closing condition if not managed proactively.
Extended Warranty and Service Contract Liabilities
Identifies all outstanding service contracts and extended warranties sold by the business, quantifies the remaining obligation, and allocates liability between buyer and seller.
Example Language
Seller shall provide Buyer with a complete schedule of all extended warranty and service contracts currently in force, including the original sale date, contract term, covered appliance, estimated remaining service obligation, and any third-party warranty administrator involved. Seller represents that total remaining warranty obligation does not exceed $[X] in aggregate. Buyer and Seller shall negotiate in good faith a reserve amount or price reduction to account for actuarially estimated future service costs. Buyer shall not assume liability for warranty claims on units sold prior to closing unless explicitly agreed in writing and reflected as a credit against the purchase price.
💡 In-house service contracts are valuable recurring revenue, but they come with real liability. If the seller has been selling multi-year service contracts and banking the revenue without reserving for future labor and parts costs, you could inherit a significant unfunded obligation. Request a 3-year claims history from the seller's service department and use it to model future liability before agreeing to assume any warranty obligations.
Due Diligence Period and Access
Establishes the timeline and scope of due diligence, including access to financial records, vendor agreements, fleet inspection, service department records, and customer data.
Example Language
Buyer shall have [45–60] calendar days from the execution of this LOI to conduct full business, financial, legal, and operational due diligence ('Due Diligence Period'). During the Due Diligence Period, Seller shall provide Buyer with unrestricted access to: (a) three years of profit and loss statements, tax returns, and recasted SDE schedules; (b) all vendor agreements, dealer authorizations, and distributor credit applications; (c) extended warranty and service contract schedules; (d) delivery fleet titles, maintenance records, and any outstanding liens; (e) real estate lease or ownership documents; (f) customer purchase history and repeat transaction data; and (g) employee records including compensation, tenure, and any pending labor disputes. Buyer may terminate this LOI for any reason during the Due Diligence Period with no liability to either party.
💡 60 days is appropriate for an appliance store given the complexity of vendor transfers, inventory counts, and warranty audits. Don't let sellers pressure you into 30-day timelines — you won't have enough time to properly evaluate the floor plan structure, inspect the delivery fleet, or get responses from manufacturer reps on authorization transfers. Protect your right to walk away cleanly during due diligence.
Exclusivity and No-Shop Provision
Prohibits the seller from soliciting or entertaining competing offers during the due diligence period in exchange for the buyer's time and resource commitment.
Example Language
In consideration of Buyer's commitment of time and resources to due diligence, Seller agrees not to solicit, encourage, or accept any offer, inquiry, or indication of interest from any third party regarding the sale of the Business for a period of [60] calendar days from the execution of this LOI ('Exclusivity Period'). Seller shall promptly notify Buyer of any unsolicited inquiries received during the Exclusivity Period. The Exclusivity Period may be extended by mutual written agreement if due diligence is ongoing and progressing in good faith.
💡 60 days of exclusivity is standard and reasonable for this deal complexity. Sellers sometimes push back, especially if they've had the business listed for a long time and are nervous about losing momentum. Remind them that a well-structured LOI with a committed buyer and SBA financing is worth protecting — going back to market after a failed deal damages both pricing and perception.
Conditions to Closing
Lists the specific conditions that must be satisfied before the buyer is obligated to close, including SBA loan approval, successful vendor authorization transfer, satisfactory inventory count, and lease assignment.
Example Language
Buyer's obligation to close is subject to satisfaction of the following conditions: (a) Buyer obtaining SBA 7(a) loan commitment on terms acceptable to Buyer; (b) successful transfer or reissuance of dealer authorizations from all major vendors accounting for more than 80% of annual product revenue; (c) completion of physical inventory count confirming inventory value within [10]% of Seller's represented value; (d) assignment or new execution of the real estate lease on terms acceptable to Buyer, with a minimum remaining term of [3] years or renewal option; (e) completion of due diligence to Buyer's satisfaction; (f) delivery fleet free of undisclosed liens or deferred maintenance exceeding $[X] in estimated repair costs; and (g) no material adverse change in the Business's financial performance or vendor relationships prior to closing.
💡 The vendor authorization condition is your most powerful protection in an appliance store deal. If the seller can't transfer the Whirlpool or GE relationship, you're buying a showroom with no product pipeline. Make sure this condition is specific: name the brands, define what 'transfer' means, and set a clear deadline. Also pay close attention to the lease — if the landlord won't assign on reasonable terms, you may need to renegotiate or find a new location.
Confidentiality and Non-Disclosure
Binds both parties to confidentiality regarding the existence of the transaction, the terms of the LOI, and any proprietary information exchanged during due diligence.
Example Language
Each party agrees to maintain the strict confidentiality of this LOI and all information exchanged in connection with the proposed transaction, including but not limited to financial statements, vendor terms, customer lists, employee information, and pricing data. Neither party shall disclose the existence or terms of this LOI to any third party without the prior written consent of the other party, except to advisors, lenders, and attorneys bound by equivalent confidentiality obligations. This confidentiality obligation shall survive termination of this LOI for a period of [24] months.
💡 Confidentiality is especially important in appliance retail because vendor reps, employees, and competitors talk. If word gets out that the store is for sale, key employees may start looking for other jobs, manufacturer reps may delay authorization discussions, and customers may delay purchases. Keep the deal circle as small as possible until closing is imminent.
Transition and Training Period
Outlines the seller's obligation to remain involved post-closing to transfer vendor relationships, train the buyer on operations, and support continuity with key accounts and delivery staff.
Example Language
Seller agrees to remain available to Buyer for a transition period of [60–90] days following closing, for a minimum of [20] hours per week, at no additional cost to Buyer. During the transition period, Seller shall: (a) introduce Buyer in person or by phone to all manufacturer regional representatives, distributor account managers, and major commercial customers; (b) train Buyer on floor plan financing management, inventory ordering processes, and service department workflows; (c) assist with onboarding of all delivery and installation crew members; and (d) support transfer of any accounts with Net-30 or Net-60 vendor credit terms to Buyer's new entity. An extended consulting arrangement beyond 90 days may be negotiated separately.
💡 Vendor relationship transfer is the number one reason appliance store buyers need a robust transition period. The Whirlpool or Bosch rep who has done business with the seller for 15 years isn't automatically going to extend the same credit terms and allocation priority to you on day one. The seller's personal introduction and endorsement is genuinely valuable — make sure it's contractually required, not just a handshake promise.
Inventory Valuation and Aging Discounts
Negotiate the methodology for valuing inventory before LOI signing. Push for a joint physical count, an aging schedule that discounts units over 180 days, and the right to exclude discontinued, damaged, or floor plan-encumbered units from the purchase. This single term can shift the effective purchase price by $50,000–$200,000 in a typical appliance store deal.
Vendor Authorization Transfer as a Hard Closing Condition
Never accept vendor transfer as a 'best efforts' obligation. Require that specific named brands — particularly any brand representing more than 10% of annual product revenue — must be formally confirmed as transferred or reissued before you are obligated to close. Define what confirmation looks like: a written dealer agreement or letter from the manufacturer's regional sales director.
Extended Warranty and Service Contract Reserve
Negotiate a purchase price holdback or escrow equal to an actuarially reasonable estimate of the net present value of unfulfilled service obligations. If the seller has been selling 5-year service contracts and collecting cash upfront, you need to understand how much of that revenue has already been spent and how much future service labor you're inheriting without a corresponding revenue stream.
Floor Plan Payoff at Closing
Make it explicit that all floor plan balances are paid from seller proceeds at closing and do not transfer to buyer. Specify which lender(s) hold the floor plan, require payoff letters 10 days before closing, and confirm that manufacturer curtailment schedules are current. Aged floor plan balances with curtailment penalties are a hidden cost that can surprise buyers who don't dig into the details.
Seller Note Subordination and Earnout Triggers
If you're asking for a seller note, negotiate the standby period upfront. SBA lenders typically require full standby for 24 months, meaning the seller won't receive payments during that window. Pair this with earnout triggers tied to vendor authorization transfer and top commercial account retention — this aligns seller incentive with the specific risk factors that could undermine your investment post-closing.
Real Estate Lease Assignment Terms
Confirm with the landlord early that the lease can be assigned on existing terms or that a new lease is available on acceptable terms before you invest in full due diligence. Appliance stores depend on showroom visibility and storage space — losing the location or facing a dramatic rent increase post-acquisition can fundamentally change the business economics. Request a minimum 3-year remaining term or renewal option as a closing condition.
Delivery Fleet Condition and Lien Release
Inspect all delivery vehicles and installation equipment before LOI finalization if possible, or make a satisfactory fleet inspection a due diligence condition. Require lien releases on all fleet vehicles included in the asset purchase. Deferred maintenance on delivery trucks is a common value killer — a fleet that looks operational can have $30,000–$80,000 in deferred repairs that become your problem on day one.
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Independent appliance stores in the lower middle market typically sell for 2.5x to 4x Seller's Discretionary Earnings (SDE). Stores at the higher end of the range have exclusive or preferred dealer authorizations with top brands like Whirlpool or Bosch, in-house service departments generating recurring revenue, strong local reputation in markets with limited big-box competition, and clean recasted financials showing 3+ years of consistent SDE growth. Stores with declining revenue, heavy owner dependency, or unresolved warranty liabilities typically trade closer to 2.5x. Inventory is generally purchased separately at cost and is not included in the SDE multiple.
Inventory is almost always purchased separately from the goodwill and FF&E components of the deal. The LOI should specify that inventory will be valued via a joint physical count completed shortly before closing, with an aging schedule that discounts units older than 180 days. Floor plan financing balances tied to that inventory should be paid off by the seller at closing from sale proceeds. Buyers should negotiate the right to exclude discontinued, damaged, or manufacturer-recalled units from the purchase regardless of the seller's book value.
Yes. Appliance stores are SBA 7(a) eligible, and most acquisitions in the $1M–$5M revenue range are financed using SBA loans. A typical structure involves 75–80% SBA 7(a) financing, a 10–15% buyer equity injection, and a seller note of 10–15% that bridges the gap. SBA lenders will require the seller note to stand by — meaning no payments to the seller — for up to 24 months. The business will need to demonstrate sufficient cash flow to service the SBA loan, and inventory purchased separately may be financed through a separate floor plan line or working capital component of the SBA loan.
This is one of the most significant deal risks in an appliance store acquisition. Manufacturers like Whirlpool, GE, and LG have discretion over who they authorize as dealers, and a transfer is not guaranteed. In your LOI, make vendor authorization transfer a hard closing condition — not a best-efforts obligation. If a major brand won't authorize the buyer, you should have the right to renegotiate the purchase price or terminate the LOI without penalty. Start the vendor transfer process immediately after LOI signing, as approvals can take 30–60 days and should not be left for the final weeks before closing.
The LOI should require the seller to disclose all active service contracts and extended warranties, including the original sale date, contract term, appliance covered, and remaining service obligation. The buyer should request a 3-year claims history from the service department to model future liability. An appropriate reserve — typically held in escrow or reflected as a purchase price reduction — should be negotiated based on actuarial estimates of future labor and parts costs. Buyers should not assume pre-closing warranty obligations without a corresponding price credit or reserve that offsets the expected cost of fulfilling those contracts.
Plan for 45–60 days. Appliance store due diligence is more complex than a typical retail acquisition because it involves a physical inventory count and aging analysis, vendor authorization transfer discussions with multiple manufacturers, review of extended warranty and service contract obligations, inspection of the delivery fleet and installation equipment, SBA lender underwriting, and lease assignment negotiations with the landlord. Sellers who push for 30-day timelines are often unaware of how many parallel workstreams are involved. A 60-day period protects you without being unreasonable for a well-prepared seller.
The LOI should include a delivery fleet inspection as part of the due diligence conditions. Request titles for all vehicles included in the sale, confirm there are no outstanding liens, and arrange a mechanical inspection of each truck and installation vehicle. Ask for the last 12 months of maintenance records and mileage logs. Deferred maintenance — worn brakes, aging transmissions, or failing lift gates — is common and can represent $30,000–$100,000 in immediate capital needs. If fleet condition is materially worse than represented, you should have the right to request a purchase price adjustment or exclude specific vehicles from the transaction.
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