A tire-shop-specific LOI guide covering inventory valuation, lease assignment, technician retention, and SBA deal structuring — written for buyers and sellers in the $1M–$5M revenue range.
A Letter of Intent (LOI) is the foundational document in any tire shop acquisition. It establishes the key economic and structural terms of the deal before either party invests heavily in due diligence, legal fees, or SBA lender underwriting. For tire shop transactions, the LOI must address several industry-specific complexities that generic business acquisition templates routinely miss: how inventory is valued and whether it is included in the purchase price, whether the facility lease can be assigned to a new owner, which supplier relationships and national account contracts transfer with the business, and how the buyer will handle the transition period if the seller is currently the primary technician or customer-facing relationship manager. Getting these terms right in the LOI — before engaging attorneys to draft a full purchase agreement — saves both parties significant time and money. This guide walks through each major LOI section with example language tailored to tire shop acquisitions and negotiation notes reflecting real deal dynamics in this market. Most single-location tire shops in the $1M–$5M revenue range transact as asset purchases with SBA 7(a) financing, seller notes of 10–20%, and inventory valued separately at cost at close. The LOI is your opportunity to align on all of these mechanics before the clock starts running on due diligence.
Find Tire Shop Businesses to AcquireBuyer and Seller Identification
Clearly identifies the purchasing entity (individual buyer, LLC, or acquiring company) and the selling entity (individual owner or business entity). For tire shop deals, it is common for the buyer to form a new LLC prior to close, and the LOI should reflect the anticipated acquisition entity even if not yet fully formed.
Example Language
This Letter of Intent is entered into as of [Date] by and between [Seller Full Legal Name] ('Seller'), sole owner of [Business Name], a tire sales and automotive service business located at [Address], and [Buyer Full Legal Name or Acquiring Entity] ('Buyer'), a [State] limited liability company or entity to be formed prior to closing. Buyer and Seller agree to negotiate in good faith toward a definitive Asset Purchase Agreement on the terms set forth herein.
💡 If the buyer is a private equity-backed roll-up or multi-location operator, the seller should confirm which entity is actually signing and whether the buyer has authority to close without additional approval from a fund or investment committee. First-time buyers using SBA financing should note that the SBA-approved lender will require the borrowing entity to be the acquiring entity in the final purchase agreement.
Purchase Price and Consideration
Specifies the total purchase price for the tire shop, how it is allocated between business assets and inventory, and the proposed deal structure. Tire shop deals typically separate the business purchase price from inventory, which is valued at cost at close rather than at retail.
Example Language
The total purchase price for the business assets of [Business Name] shall be [Purchase Price], exclusive of inventory. Inventory shall be valued at Seller's documented cost as of the closing date, as verified by a joint physical inventory count conducted no more than five (5) business days prior to close, and shall be added to the purchase price at that time. The purchase price shall be funded as follows: (a) SBA 7(a) loan proceeds of approximately [80–90% of purchase price]; (b) Seller carry note of [10–15% of purchase price] on terms described herein; and (c) Buyer equity injection of [10–15% of purchase price] at close.
💡 Inventory valuation is one of the most contested elements in tire shop acquisitions. Sellers often want inventory valued at replacement cost or a blended retail rate; buyers and SBA lenders will insist on cost. Establish clearly in the LOI whether aged or slow-moving inventory (e.g., units sitting more than 180 days) will be excluded or discounted. Buyers should also clarify whether shop equipment, tire mounting and balancing machines, alignment racks, and vehicle lifts are included in the stated purchase price or valued separately.
Seller Financing and Earnout Terms
Defines the terms of any seller carry note, including interest rate, repayment period, and any earnout provisions tied to post-close revenue or customer retention. Seller financing is extremely common in tire shop acquisitions and is often required by SBA lenders as evidence of seller confidence in the transition.
Example Language
Seller agrees to carry a promissory note in the amount of [Seller Note Amount] at an interest rate of [5–7]% per annum, with monthly principal and interest payments amortized over [24–60] months. The Seller note shall be subordinate to the SBA lender's senior debt. In addition, the parties agree to an earnout provision whereby Seller shall receive an additional payment of up to [Earnout Amount] contingent on the business achieving trailing twelve-month revenue of no less than [Revenue Threshold] during the [12 or 24] months following the closing date, payable within [30] days of the measurement period end.
💡 SBA lenders typically require seller notes to be on full standby for the first 24 months of the loan, meaning no principal or interest payments may be made to the seller during that period. Buyers should confirm standby requirements with their lender before finalizing seller note terms in the LOI. Earnouts tied to fleet account retention or commercial contract renewals are increasingly common in tire shop deals where a seller holds key relationships with local municipalities, car dealerships, or trucking companies.
Assets Included and Excluded
Enumerates the specific business assets being purchased, including equipment, customer lists, phone numbers, domain, social media accounts, and vendor agreements, and explicitly excludes items such as cash, receivables, and personal vehicles.
Example Language
The following assets shall be included in the purchase: all tire mounting, balancing, and alignment equipment; vehicle lifts and service bay equipment; point-of-sale and shop management software and associated customer data; customer lists and service history records; business name, phone number(s), domain name, and social media accounts; all transferable supplier agreements and vendor pricing contracts; and the existing facility lease, subject to landlord consent. The following assets are expressly excluded: cash and cash equivalents at close, all accounts receivable generated prior to closing, Seller's personal vehicle(s), and any assets specifically listed in Schedule A attached hereto.
💡 Buyers should pay careful attention to shop management software and customer data transfer — many independent tire shops use platforms like Protractor, TireShop, or Mitchell1, and data migration or license transfer can be complex. Confirm whether vendor pricing agreements with regional tire distributors or national accounts (e.g., Goodyear, Michelin, Bridgestone commercial programs) are transferable and at what terms. Sellers should retain all accounts receivable generated before close as these represent real cash flow they are entitled to collect.
Facility Lease Assignment
Addresses the assignment of the existing facility lease to the buyer, including landlord consent requirements, remaining lease term, and any conditions the buyer requires before proceeding to close. Lease quality and location are critical to the valuation of any tire shop.
Example Language
This LOI and the consummation of the contemplated transaction are expressly contingent upon Buyer's receipt of written landlord consent to assign the existing facility lease located at [Address] to Buyer on terms substantially identical to those currently in effect, or upon Buyer entering into a new lease with Landlord on terms acceptable to Buyer in its sole discretion. Seller shall cooperate fully in facilitating landlord communications and shall provide Buyer with a complete copy of the existing lease, all amendments, and any correspondence with the landlord within five (5) business days of execution of this LOI. Buyer requires a minimum of [5] years of remaining lease term, inclusive of any renewal options, as a condition of closing.
💡 Lease assignment is frequently the deal-killer in tire shop acquisitions. Many independent shops operate on month-to-month leases or have fewer than 2 years remaining — this significantly undermines SBA financing eligibility and buyer confidence. Sellers should negotiate lease extensions with their landlord before going to market, ideally securing a minimum 5-year base term with at least one 5-year renewal option. Buyers should verify the lease includes no co-tenancy clauses or personal guarantee provisions that may be difficult to assume.
Due Diligence Period and Access
Establishes the length of the due diligence period, what documents and access the buyer is entitled to, and the process for raising objections or renegotiating terms based on findings.
Example Language
Following execution of this LOI, Buyer shall have [45–60] calendar days to conduct comprehensive due diligence, including but not limited to: review of three (3) years of tax returns and monthly profit and loss statements; a physical inventory audit; inspection of all equipment for condition and remaining useful life; review of the facility lease and landlord communications; verification of all technician certifications, employment agreements, and compensation structure; and confirmation of the transferability of all key vendor and supplier agreements. Seller shall provide all reasonably requested documents within five (5) business days of any request. Buyer may terminate this LOI without penalty at any time during the due diligence period if findings materially differ from representations made by Seller.
💡 For tire shop acquisitions, buyers should prioritize an early inventory audit and a review of the trailing twelve months of tire sales by brand and SKU — this reveals turnover velocity, margin quality, and whether slow-moving stock will inflate the inventory purchase price at close. Technician interviews, ideally conducted near the end of due diligence with seller cooperation, are essential to assessing retention risk. EPA compliance documentation, particularly for used oil and tire disposal, should be reviewed to confirm no outstanding violations.
Transition and Training Period
Defines the seller's obligation to remain involved in the business post-close to support customer introductions, technician management, and operational knowledge transfer. This is especially important when the seller has served as the primary technician or the face of the business.
Example Language
Seller agrees to remain available to Buyer for a transition and training period of [60–90] days following the closing date, at no additional cost to Buyer, for a minimum of [20–30] hours per week. During this period, Seller shall introduce Buyer to key commercial accounts and fleet customers, support technician management and daily operations, and transfer operational knowledge including vendor ordering procedures, pricing practices, and supplier contacts. Following the initial transition period, Seller agrees to remain available for up to [6] months on a consulting basis at a rate of [Hourly Rate] per hour, as requested by Buyer.
💡 Sellers who are the primary technician represent a significant transition risk. Buyers should negotiate a longer transition period — 90 days minimum — and tie a portion of the seller note or earnout to the buyer's ability to retain key technicians and commercial accounts during this window. If the seller holds exclusive relationships with fleet customers such as local trucking companies, car dealerships, or municipal vehicle fleets, the LOI should require the seller to make formal introductions and facilitate account transfers as a condition of receiving full consideration.
Non-Compete and Non-Solicitation
Restricts the seller from opening or operating a competing tire shop or soliciting former customers and employees within a defined geographic area and time period following the close of the transaction.
Example Language
For a period of [3–5] years following the closing date, Seller shall not, directly or indirectly, own, operate, manage, or have any financial interest in any business that sells or installs tires or provides automotive service within a [10–25] mile radius of [Business Address]. Seller further agrees not to solicit, directly or indirectly, any customer, fleet account, or employee of the business for the same period. This covenant shall survive the closing and shall be enforceable by injunctive relief without the requirement to post bond.
💡 Non-compete enforceability varies by state, and buyers should confirm the geographic radius and duration are reasonable and defensible in the jurisdiction where the shop operates. A 5-year, 15–25 mile non-compete is standard for tire shop acquisitions in most markets given the hyper-local nature of customer relationships. SBA lenders typically require a signed non-compete as part of the loan closing package, so sellers should be prepared to execute one regardless.
Exclusivity and Confidentiality
Binds the seller to negotiate exclusively with the buyer for a defined period and prohibits both parties from disclosing deal terms or business information to third parties during and after the process.
Example Language
Upon execution of this LOI, Seller agrees to negotiate exclusively with Buyer for a period of [60–90] days and shall not solicit, entertain, or respond to any other offers or inquiries regarding the sale of the business during this period. Both parties agree to maintain the confidentiality of all non-public business information, financial data, customer lists, and deal terms disclosed during the course of this transaction, both during and following the due diligence period, regardless of whether the transaction closes.
💡 Exclusivity protects the buyer's investment of time and due diligence costs. Sellers should resist open-ended exclusivity periods — 60 days is reasonable; beyond 90 days without demonstrated buyer progress toward SBA approval or a definitive purchase agreement is excessive. Confidentiality is particularly important in tire shop deals where employees, fleet customers, and competitors operate in close-knit local communities and premature disclosure can destabilize the business.
Conditions to Closing
Lists the specific conditions that must be satisfied before either party is obligated to close, including financing approval, landlord consent, and satisfactory completion of due diligence.
Example Language
The closing of this transaction shall be conditioned upon: (a) Buyer's receipt of SBA 7(a) loan approval in an amount sufficient to fund the purchase price on terms acceptable to Buyer; (b) written landlord consent to assign or re-execute the facility lease on terms acceptable to Buyer; (c) Buyer's satisfactory completion of due diligence with no material adverse findings; (d) all required business licenses, EPA certifications, and state tire dealer registrations being transferable to and obtainable by Buyer; and (e) no material adverse change in the business, revenues, or assets of [Business Name] between the date of this LOI and the closing date.
💡 Material adverse change clauses protect buyers from unexpected revenue drops, equipment failures, or key employee departures between LOI signing and close. Given that tire shops can experience meaningful revenue swings month-to-month due to weather patterns, seasonal demand, or the loss of a single fleet account, buyers should define 'material adverse change' quantitatively — for example, a revenue decline exceeding 15% compared to the same period in the prior year triggers the right to renegotiate or terminate.
Inventory Valuation Methodology
Tire inventory is often the single largest asset being purchased outside of goodwill and equipment. The LOI must define exactly how inventory will be counted and valued at close. Buyers and SBA lenders insist on cost basis — never retail or replacement cost. Additionally, the parties must agree on how aged inventory (units sitting 180+ days, discontinued brands, or discontinued sizes with low local demand) will be treated. A reasonable approach is to discount units older than 180 days by 25–50% and exclude any units older than 12 months entirely. Without explicit LOI language on this, inventory disputes at close are nearly inevitable.
Lease Assignment Contingency
Because tire shop value is inseparably tied to location and traffic visibility, a lease that cannot be assigned to the buyer — or that expires within 2 years of close — is a fundamental deal risk. Buyers should make lease assignment with a minimum of 5 years of remaining term (including renewal options) a hard condition of closing, not merely a preference. Sellers should address this before going to market by negotiating directly with their landlord. SBA lenders will typically not approve financing on a lease with fewer than the full loan term remaining, usually 10 years.
Seller Note Standby Provisions
When SBA financing is used, the SBA typically requires any seller carry note to be placed on full standby — meaning no principal or interest payments — for the first 24 months of the loan. Sellers who expect monthly cash flow from their note immediately after closing will be disappointed. The LOI should acknowledge this standby requirement explicitly so the seller is not blindsided during SBA underwriting. This also affects how the seller's retirement income planning should be structured in the 2 years following close.
Technician Retention and Key-Person Risk
If the shop employs two or more technicians who are not the seller, their retention through close and during the transition period is critical to business continuity. The LOI should include a representation that key technicians are currently employed and in good standing, and consider including a provision that a failure to retain named technicians through close gives the buyer the right to renegotiate price or walk away. Buyers acquiring shops where the seller is the only certified technician should require a longer transition period and potentially structure part of the purchase price as an earnout contingent on buyer-hired replacements being trained and productive.
Supplier Agreement and National Account Transferability
Many independent tire shops carry preferred dealer pricing from regional distributors or program pricing from manufacturers like Goodyear, Michelin, Continental, or Bridgestone. These pricing arrangements may not automatically transfer to a new owner and can take 30–90 days to renegotiate. If the seller has fleet contracts with local businesses or municipalities, each contract should be reviewed individually for transferability and change-of-control provisions. The LOI should include a representation from the seller that they are unaware of any agreements that prohibit or restrict assignment, and require the seller to facilitate introductions to all key supplier representatives during due diligence.
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Most LOIs are intentionally structured to be non-binding on the core deal terms — meaning either party can walk away before a definitive purchase agreement is signed. However, specific provisions within the LOI are typically written as binding obligations, including the exclusivity period (preventing the seller from shopping the deal to other buyers), the confidentiality clause (protecting sensitive financial and customer data), and any agreed cost-sharing arrangements for due diligence expenses. Buyers and sellers should have an attorney review the LOI before signing to confirm which sections are intended to be binding and enforceable in their state.
In most tire shop acquisitions, inventory is valued separately from the business purchase price and added to total consideration at close based on a joint physical count conducted within 5 business days of closing. Inventory is valued at the seller's documented cost — meaning the price the seller paid to their distributor — not at retail or replacement value. Buyers should negotiate age-based discounts for slow-moving inventory: units older than 180 days are commonly discounted 25–50%, and units older than 12 months are frequently excluded from the purchase entirely. The LOI should establish these mechanics explicitly to avoid disputes at the closing table.
Yes, tire shops are strong candidates for SBA 7(a) financing because they are established, asset-based businesses with verifiable revenue and essential service demand. SBA loans can cover 80–90% of the purchase price, with the remainder split between seller financing and buyer equity. The LOI should reflect SBA deal structure conventions from the outset — specifically, that the seller carry note will be on standby for the first 24 months, that the buyer's equity injection will be a minimum of 10%, and that the transaction will be structured as an asset purchase rather than a stock purchase in most cases. Buyers who draft an LOI with terms that conflict with SBA underwriting guidelines will face delays and potential deal restructuring later in the process.
Absolutely. Owner-operator dependency is one of the most significant risk factors in tire shop acquisitions, and the LOI is the right place to address it. If the seller is the primary or sole certified technician, the buyer should negotiate a longer transition period — 90 days minimum, with a consulting arrangement for up to 6 months afterward — and consider structuring a portion of the purchase price as an earnout tied to gross revenue retention during the first 12 months post-close. Buyers should also make it a due diligence condition to confirm that at least one non-owner technician is capable of performing core services independently. SBA lenders will often flag heavy owner dependency as a risk factor during underwriting.
Most tire shop acquisitions close within 60–120 days of LOI execution when SBA financing is involved. The timeline is driven primarily by SBA lender underwriting, which typically takes 30–60 days from a complete application package, and by the lease assignment process, which depends on landlord responsiveness. Non-SBA deals with seller financing can close faster — sometimes within 45 days — but are less common for acquisitions above $500,000 in purchase price. Buyers should build a realistic timeline into the exclusivity period of the LOI and confirm with their SBA lender upfront how long underwriting is likely to take given current volume and deal complexity.
The LOI does not need to contain a comprehensive employment list, but it should address technician retention as a material business condition. At minimum, the LOI should include a representation that key technicians are currently employed and in good standing, and establish a due diligence right for the buyer to review all employment records, certifications, compensation structures, and any existing non-compete or non-solicitation agreements. Buyers who are acquiring a shop in part because of its experienced technician team should consider making retention of named individuals through the closing date a condition of closing, with a price adjustment right if a key technician departs before close.
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