A practical, industry-specific LOI guide covering purchase price, equipment valuation, customer concentration protections, and transition terms — built for buyers and sellers of decorated apparel businesses in the $1M–$5M revenue range.
An LOI (Letter of Intent) is the foundational document that kicks off a serious acquisition of a screen printing or embroidery business. It establishes the proposed purchase price, deal structure, due diligence timeline, and key conditions before a formal purchase agreement is drafted. For decorated apparel shops, the LOI must address factors unique to this industry: aging automatic presses and multi-head embroidery machines that may need capital investment, customer concentration risk in B2B accounts like schools or sports leagues, and the seller's role in managing client relationships and production. A well-crafted LOI protects both parties, signals buyer credibility for SBA financing, and creates alignment on the major deal terms before attorneys invest significant time in the purchase agreement. This guide walks through every section of a standard LOI for a screen printing or embroidery business acquisition, with example language and negotiation guidance tailored to this specific industry.
Find Screen Printing & Embroidery Businesses to AcquireIdentification of Parties and Business
Clearly identifies the buyer (or buyer entity), the seller, and the legal name and location of the target business. For screen printing shops, this section should note whether the transaction is structured as an asset purchase or stock purchase, as most lower middle market shop acquisitions are asset purchases that allow the buyer to select which liabilities to assume.
Example Language
This Letter of Intent ('LOI') is entered into as of [Date] between [Buyer Name or Entity], ('Buyer'), and [Seller Name], ('Seller'), with respect to the proposed acquisition of substantially all assets of [Business Legal Name], a [State] [Entity Type] operating a screen printing and embroidery business located at [Address] ('Company'). The proposed transaction is intended to be structured as an asset purchase.
💡 Buyers using SBA 7(a) financing must establish a clean legal entity prior to closing — most lenders require a newly formed LLC or corporation as the acquiring entity. Confirm with your SBA lender early, as the entity named in the LOI should match the borrowing entity. Sellers should confirm whether any real estate is included in the transaction or held in a separate entity, as this affects purchase price allocation and SBA eligibility.
Proposed Purchase Price and Valuation Basis
States the total proposed purchase price, the valuation methodology used to arrive at that figure (typically a multiple of SDE or EBITDA), and how the price may be adjusted. Screen printing businesses typically trade at 2.5x–4.5x SDE, with premiums for diversified B2B client rosters, modern equipment, and documented processes.
Example Language
Buyer proposes to acquire the assets of the Company for a total purchase price of $[X,XXX,000] ('Purchase Price'), representing approximately [X.Xx] times the Company's trailing twelve-month Seller's Discretionary Earnings of $[XXX,000] as represented by Seller. The Purchase Price is subject to adjustment pending Buyer's completion of financial due diligence, equipment inspection, and customer concentration review. The Purchase Price includes all production equipment, customer lists, trade names, domain and social media assets, supplier relationships, and work-in-progress inventory, but excludes cash and accounts receivable unless otherwise agreed.
💡 Sellers should push back on any purchase price reduction tied solely to equipment age without an independent appraisal. Buyers should ensure the LOI clearly distinguishes between what is and is not included — particularly accounts receivable, raw blank apparel inventory, and any vehicles. If the seller owns the building, address real estate separately with a lease or purchase option term sheet attached.
Deal Structure and Financing Terms
Outlines how the purchase price will be funded, including SBA loan proceeds, buyer equity injection, and any seller note. Most screen printing and embroidery business acquisitions at this size are SBA 7(a) financed, requiring 10–15% buyer equity down, with sellers sometimes asked to hold a small subordinated note to satisfy lender requirements.
Example Language
Buyer intends to finance the acquisition through an SBA 7(a) loan for approximately [XX]% of the Purchase Price, with Buyer contributing equity of not less than [10–15]% of the Purchase Price at closing. Buyer requests that Seller consider a seller note of up to [5–10]% of the Purchase Price, subordinated to the SBA loan, bearing interest at [Prime + 1%] with a [24–36]-month term, as a condition of SBA lender approval. Buyer will provide a lender pre-qualification letter within [15] business days of LOI execution.
💡 SBA lenders will require the seller note to be on full standby — meaning no principal or interest payments — for the first 24 months of the loan. Sellers should understand this before agreeing. Buyers should be transparent about their lender pre-qualification status upfront; sellers of profitable print shops will not hold exclusivity for a buyer who cannot demonstrate financing readiness.
Earnout Provisions
Defines whether any portion of the purchase price is contingent on post-closing performance. Earnouts are common in screen printing acquisitions where the seller is the primary salesperson or account manager for key B2B clients such as school districts, corporate uniform accounts, or sports organizations.
Example Language
In recognition of the Seller's role in maintaining key customer relationships, the parties agree that up to $[XX,000] of the Purchase Price may be structured as an earnout, payable over [12–24] months post-closing, contingent upon the Company retaining at least [80]% of trailing twelve-month gross revenue from the top [10] customer accounts as identified in Exhibit A. Earnout payments will be calculated quarterly based on invoiced revenue from qualifying accounts, with payment within [30] days of each quarter-end.
💡 Buyers should resist earnouts tied to overall revenue if the seller is not staying on in an active sales role — only tie earnout triggers to events the seller can directly influence during the transition period. Sellers should ensure earnout metrics are based on gross revenue from named accounts, not net profit, to avoid disputes over how post-closing operating decisions affect the measurement. Always specify which accounts are in scope and attach a schedule at LOI signing.
Due Diligence Period and Access
Establishes the timeframe and scope for buyer's investigation of the business, including financial records, equipment inspection, customer review, and staff conversations. Screen printing acquisitions require hands-on equipment inspection and ideally a production floor walkthrough with a qualified technician.
Example Language
Buyer shall have [45–60] calendar days from the date of LOI execution ('Due Diligence Period') to conduct a full review of the Company, including but not limited to: (i) three years of tax returns and monthly P&L statements; (ii) customer revenue reports by account for the trailing 36 months; (iii) equipment list with purchase dates, maintenance records, and current condition; (iv) employee roster with compensation, tenure, and role documentation; (v) supplier agreements and current pricing; and (vi) any existing contracts, purchase orders, or service agreements. Seller agrees to provide reasonable access to the production facility, equipment, and key personnel, subject to confidentiality protections.
💡 Buyers should schedule an independent equipment appraisal or bring in a qualified print industry technician to assess automatic press condition, embroidery machine heads, and any DTG or sublimation equipment within the first two weeks of due diligence — equipment issues are the most common cause of purchase price renegotiation. Sellers should avoid granting open-ended staff access until later in due diligence, as early disclosure of a potential sale can create employee anxiety on the production floor.
Exclusivity and No-Shop Provision
Grants the buyer a period of exclusivity during which the seller agrees not to solicit or entertain competing offers. This is standard in LOIs and protects the buyer's investment of time, legal fees, and due diligence costs.
Example Language
In consideration of Buyer's commitment to proceed with due diligence and financing in good faith, Seller agrees to a no-shop period of [45–60] days from the date of LOI execution, during which Seller will not solicit, entertain, or accept competing offers for the purchase of the Company or its assets. Seller agrees to promptly notify Buyer of any unsolicited expressions of interest received during this period.
💡 Sellers should resist exclusivity periods longer than 60 days unless the buyer has demonstrated strong financing readiness and signed engagement with an SBA lender. Buyers should build in a mechanism to extend exclusivity by 15–30 days if SBA lender processing delays the timeline, as SBA underwriting on decorated apparel businesses can take longer than other industries given equipment-heavy collateral packages.
Transition and Training Period
Defines the seller's post-closing commitment to remain with the business for knowledge transfer, customer introductions, and production oversight. Given that many screen printing shop owners are the face of the business with longstanding school and corporate accounts, a structured transition is critical to revenue retention.
Example Language
Seller agrees to remain with the Company following closing for a transition period of no less than [6] months and up to [12] months at Buyer's election, providing [XX] hours per week of support for customer relationship introductions, production process documentation, supplier negotiations, and staff oversight. Seller will be compensated at a rate of $[X,000] per month during the transition period. Seller agrees not to solicit Company customers or employees for a period of [3] years following the end of the transition period within a [XX]-mile radius of [City, State].
💡 Buyers should tie at least a portion of any seller note or deferred consideration to the seller's completion of the agreed transition period and successful handoff of named accounts. Sellers should negotiate a clear definition of what constitutes 'completion' of transition obligations to avoid open-ended commitments. For shops where the seller is also the head of sales, 12 months is not unreasonable — the buyer needs time to establish direct relationships with school districts and corporate procurement contacts.
Representations and Conditions to Closing
Lists the seller's key representations that must remain true through closing, and the conditions that must be satisfied for the transaction to proceed. For screen printing businesses, critical representations include equipment condition, customer account status, and accuracy of financial statements.
Example Language
Seller represents that: (i) the financial statements provided to Buyer are accurate and complete in all material respects; (ii) no single customer accounted for more than [25]% of gross revenue in the trailing twelve months; (iii) all production equipment listed in Exhibit B is in good working order with no material defects undisclosed to Buyer; (iv) there are no pending or threatened claims, liens, or litigation affecting the business or its assets; (v) all employees listed in Exhibit C remain employed as of the closing date; and (vi) Seller has not entered into any material new contracts or made capital expenditures exceeding $[10,000] without Buyer's written consent. Closing is conditioned upon receipt of SBA loan approval, satisfactory completion of due diligence, and execution of a definitive purchase agreement.
💡 Buyers should explicitly include a representation about customer concentration — if due diligence reveals that one school district or corporate account represents 40%+ of revenue undisclosed, this should be grounds for price renegotiation. Sellers should push for a materiality qualifier on equipment representations so that minor issues with secondary embroidery machines or ink mixing stations do not create a technical breach.
Customer Concentration Threshold and Price Adjustment Trigger
Negotiate a specific threshold — typically no single customer exceeding 25% of trailing twelve-month revenue — and define what happens if due diligence reveals concentration above that level. Build in a purchase price adjustment formula, such as a reduction of 0.25x SDE for each 10% above the threshold, rather than a binary walk-away right. This is especially important for shops where one school district or large corporate uniform account dominates the order book.
Equipment Valuation and Capital Expenditure Reserve
The LOI should address whether the purchase price assumes equipment is in good working order or whether an independent appraisal will govern price allocation. Negotiate the right to a third-party equipment inspection and agree upfront that any estimated near-term replacement costs for automatic presses or multi-head embroidery machines exceeding $[X,000] will reduce the purchase price dollar-for-dollar or be funded by the seller at closing.
Seller Note Terms and SBA Standby Requirements
If the deal includes a seller note to bridge SBA financing requirements, negotiate the interest rate, term, and whether it will be on full standby during the SBA loan period. SBA 7(a) lenders typically require seller notes to be on complete standby — no payments for 24 months. Sellers should negotiate for a higher interest rate to compensate for deferred payment risk, and buyers should confirm these terms with their SBA lender before LOI execution.
Inventory Valuation and Adjustment at Closing
Raw blank apparel, inks, threads, and work-in-progress inventory can represent $50,000–$200,000 in value at a mid-size print shop. Negotiate whether inventory is included in the base purchase price or priced separately at cost, and define the methodology for valuing WIP orders that are in production at closing. A physical inventory count within 5 business days of closing with a corresponding purchase price true-up protects both parties.
Non-Compete Scope and Carve-Outs
The non-compete agreement for a screen printing seller must be carefully scoped. Negotiate the geographic radius (typically 25–50 miles depending on market density), the duration (3–5 years is standard), and whether the seller is permitted to do small personal or family projects. Buyers should ensure the non-compete explicitly covers embroidery, promotional products, and DTG printing — not just screen printing — to prevent the seller from pivoting to a related service that competes for the same B2B accounts.
Find Screen Printing & Embroidery Businesses to Acquire
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45 to 60 days is standard for a screen printing or embroidery business in the $1M–$5M revenue range. This gives the buyer enough time to review three years of financials, conduct a physical equipment inspection, analyze customer concentration by account, speak with key employees confidentially, and allow an SBA lender to begin underwriting. If the business has complex equipment (multiple automatic presses, 20+ head embroidery machines, DTG units) or a large customer roster, request 60 days. Avoid agreeing to less than 30 days — equipment and customer due diligence alone typically requires two to three weeks for a thorough review.
Yes, an earnout is often appropriate and protects both parties in this situation. When the seller is the primary salesperson and account manager for major B2B clients — school districts, sports leagues, or corporate uniform accounts — there is legitimate risk that some revenue departs with the seller. A well-structured earnout ties a portion of the purchase price (typically 10–20%) to the retention of named accounts over 12–24 months post-closing. The key is to attach a schedule of specific accounts at the time of LOI signing, use gross revenue (not profit) as the measurement metric, and only apply the earnout to accounts the seller is actively involved in transitioning. Do not apply earnout mechanics to accounts already managed by other staff.
Virtually all lower middle market screen printing and embroidery acquisitions are structured as asset purchases. This allows the buyer to select which assets and liabilities to assume, provides a stepped-up tax basis on equipment and goodwill, and protects the buyer from inheriting undisclosed liabilities such as prior environmental issues with ink or chemical disposal, employee claims, or vendor disputes. SBA 7(a) lenders also generally prefer asset purchases. The only scenario where a stock purchase might be considered is if the business holds a valuable long-term lease or government contract that cannot be easily assigned to a new entity.
Screen printing and embroidery businesses in the lower middle market typically trade at 2.5x to 4.5x Seller's Discretionary Earnings (SDE). Shops at the lower end of the range tend to have significant customer concentration, aging equipment requiring near-term replacement, heavy owner dependency, or inconsistent revenue. Businesses commanding 3.5x–4.5x SDE typically feature diversified B2B client rosters with no single account exceeding 20–25% of revenue, modern automatic presses and multi-head embroidery machines in good working condition, trained staff capable of operating without the owner, and clean financials with 40%+ gross margins. Specialty capabilities such as high-stitch-count embroidery, large-format printing, or athletic sublimation can support premiums at the top of the range.
Equipment problems discovered during due diligence give the buyer grounds to renegotiate the purchase price, request a seller credit at closing, or in serious cases, terminate the LOI. This is why it is critical to include language in the LOI giving the buyer the right to conduct a physical equipment inspection and to adjust the purchase price based on findings. Common issues in screen printing shops include worn squeegee systems on automatic presses, degraded registration systems, aging embroidery machine heads approaching end-of-life, and DTG printers with high maintenance costs. Have a qualified print industry technician — not just the seller's maintenance contact — inspect all production equipment early in due diligence, and get replacement cost estimates for anything over five to seven years old.
Yes, screen printing and embroidery businesses are SBA 7(a) eligible, and the vast majority of acquisitions in this size range are SBA-financed. Your LOI should explicitly state that the transaction is contingent upon receipt of SBA loan approval and should include the intended financing structure: typically 80–85% SBA 7(a) loan, 10–15% buyer equity, and optionally 5–10% seller note on standby. Including a financing contingency and a realistic closing timeline (90–120 days from LOI to closing, accounting for SBA underwriting) in the LOI sets appropriate expectations for the seller and prevents disputes if underwriting takes longer than anticipated. Attach or reference a lender pre-qualification letter if you have one — sellers of quality decorated apparel businesses will prioritize buyers who can demonstrate financing readiness.
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