Retail Business LOI Template & Negotiation Guide

Parties and Business Identification

Identifies the legal names and roles of the buyer, seller, and the retail business being acquired, including the entity type, trade name, and primary operating location(s). For multi-location retailers or businesses with both physical and e-commerce operations, all included locations and digital assets should be listed explicitly.

💡 If the business operates multiple store locations, confirm upfront which locations are included in the transaction. For e-commerce-enabled retailers, explicitly state that the website domain, digital inventory, customer email lists, and social media accounts are included in the asset purchase to avoid disputes later.

Purchase Price and Consideration

States the total proposed purchase price for the business assets, excluding or including inventory depending on the agreed structure. In retail acquisitions, it is standard to state a 'base business price' for goodwill, fixtures, equipment, and intangibles, with inventory purchased separately at a verified cost value determined at closing.

💡 Never combine inventory into the headline purchase price without a defined cap and audit right. Sellers often overvalue aging or fashion-sensitive inventory. Negotiate a maximum inventory cap (e.g., not to exceed $[X]) and specify who bears the cost of the inventory count. For SBA-financed deals, note that inventory purchased at closing may require separate working capital line treatment depending on lender requirements.

Deal Structure and Asset Purchase

Specifies that the transaction will be structured as an asset purchase (standard for retail acquisitions), identifies the key assets being acquired, and confirms that the buyer is not assuming undisclosed liabilities. Assets typically include store fixtures and equipment, inventory, POS systems, customer data, vendor relationships, trade name, website, and goodwill.

💡 Confirm whether POS software licenses are transferable or require a new subscription. Retail sellers often underestimate the value of their customer email list and loyalty program database — buyers should explicitly include these. Exclude accounts payable, outstanding gift card liabilities, and any pre-closing sales tax obligations from assumed liabilities unless specifically negotiated.

Financing Contingency

States the buyer's intended financing method, including SBA 7(a) loan financing where applicable, and conditions the LOI on the buyer's ability to obtain financing approval within a defined period. This section also outlines the anticipated capital structure including buyer equity injection, seller note, and institutional debt.

💡 SBA lenders will require the seller note to be on full standby for the first 24 months — make sure the seller understands this structure before signing the LOI. If the seller is resistant to a seller note, explore whether the purchase price can be adjusted downward or whether an earnout can replace part of the deferred consideration. Pre-qualifying with an SBA lender before submitting an LOI significantly strengthens buyer credibility with retail sellers.

Lease Assignment and Landlord Consent

Addresses the critical contingency of obtaining the landlord's written consent to assign the existing lease to the buyer, or the negotiation of a new lease with acceptable terms. For retail businesses, this is often the single most deal-sensitive contingency and must be addressed early in the LOI.

💡 Request a copy of the existing lease as part of the LOI process — before signing if possible. Review rent-to-revenue ratio (healthy retail leases typically keep occupancy costs at 8–12% of gross revenue), remaining term, renewal options, and any co-tenancy clauses. If the lease has fewer than 3 years remaining with no renewal rights, treat this as a major valuation risk and negotiate accordingly. Some landlords use assignment as an opportunity to reset rent to market — confirm what the landlord's position will be before proceeding.

Due Diligence Period and Access

Establishes the timeframe and scope of the buyer's due diligence investigation, including access to financial records, inventory, vendor contracts, lease documents, POS data, and key personnel. Retail due diligence typically runs 30–60 days and must include a physical inventory audit.

💡 POS data is the most reliable revenue verification tool in retail — insist on raw transaction-level exports rather than summarized reports. Cross-reference POS data against bank deposits and tax returns to identify cash handling discrepancies. Schedule the physical inventory observation during a low-traffic period to minimize disruption to store operations and staff. If seasonal inventory creates distortion, request data from multiple seasonal periods.

Exclusivity and No-Shop Period

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or accept competing offers for the business. This protects the buyer's investment of time, money, and resources in due diligence.

💡 Sixty days is appropriate for most retail acquisitions given the complexity of inventory audits and lease negotiations. If the landlord approval process is expected to take longer, request a 90-day exclusivity period or build in an automatic extension mechanism tied to active lender and landlord engagement. Sellers may resist long exclusivity periods — consider offering a good-faith deposit of $5,000–$25,000 applied to the purchase price at closing in exchange for a longer exclusivity window.

Earnout Provisions (If Applicable)

Outlines any contingent consideration tied to post-closing business performance, typically used in fashion-forward, trend-dependent, or seasonal retail businesses where revenue predictability is lower. Earnouts bridge valuation gaps between buyer and seller when future performance is uncertain.

💡 Earnouts are appropriate for specialty retail categories with trend-sensitive revenue — think fashion boutiques, seasonal outdoor gear, or gift retail — where the seller's 3-year historical performance may not reliably predict forward revenue under new ownership. Tie earnout metrics to gross revenue rather than EBITDA to reduce buyer manipulation risk. Sellers should insist on buyer operating covenants during the earnout period to prevent deliberate revenue suppression.

Confidentiality and Employee Non-Disclosure

Obligates both parties to maintain strict confidentiality regarding the terms of the LOI and the pending transaction, with particular attention to protecting the seller from premature disclosure to employees, customers, suppliers, and competitors.

💡 Premature disclosure of a retail sale can trigger immediate damage: key employees may leave, loyal customers may shift spending, and vendors may tighten credit terms. Sellers should be especially cautious about landlord engagement timing — approach the landlord about lease assignment only after mutual LOI execution and preferably after a lender commitment letter is in hand. Establish a clear communication plan for employee notification to be executed only at or immediately after closing.

Closing Timeline and Conditions

Sets a target closing date and lists the material conditions that must be satisfied before the transaction can close, including completion of due diligence, lease assignment, financing approval, and execution of a definitive Asset Purchase Agreement.

💡 Build in adequate buffer for SBA processing timelines — SBA 7(a) loans for retail acquisitions typically take 45–90 days from application to funding. The seller transition/consulting period is non-negotiable for most retail buyers; it ensures continuity of vendor relationships, customer introductions, and staff management during the handoff. Consider a 90-day consulting period for owner-operated stores with strong personal customer relationships.