Letter of Intent for Business Purchase: How Buyers Write LOIs That Get Accepted

A letter of intent for a business purchase is the buyer’s formal offer to acquire the company. It’s usually 3-6 pages, mostly non-binding, and ends with a request that the seller grant exclusivity for 60-90 days. During that exclusivity window, the buyer completes due diligence, finalizes financing, and negotiates the definitive purchase agreement. If the LOI is accepted, the seller stops talking to other buyers.

The LOI is where the deal is won or lost. Sellers and their advisors compare LOIs on a spreadsheet: price, structure, financing, timeline, contingencies, earnest money. The highest number rarely wins outright — the most credible LOI does. A buyer who shows up with proof of funds, a fast diligence schedule, and a clean reps and warranties expectation can often win against a higher bidder who looks shaky.

Buyers underestimate how much sellers care about certainty. Sellers have already gone through the emotional decision to sell. What they want now is a buyer who will actually close on the terms in the LOI — not one who will retrade after diligence, drag the timeline, or surface financing problems at week 8. Every credible signal you put in the LOI reduces the seller’s perceived risk.

This guide is written from the buyer’s perspective. It walks through what every accepted LOI includes, the credibility signals that move the needle for sellers, the role of earnest money, and a section-by-section sample structure you can adapt. It does not cover the seller’s side of LOI evaluation in depth — for that, see our guide on the letter of intent (LOI) generally.

“The seller is not just reading your number. They’re reading whether you can actually close. A clean, credible LOI at a fair price beats a higher LOI from a buyer the seller doesn’t trust.”

Key Takeaways

• Sellers compare LOIs on price + certainty. The highest price rarely wins if the buyer looks unreliable.
• State a clear price (not a wide range). A range invites the seller to assume the bottom of it.
• Name your financing sources with evidence: equity commitment letters, lender term sheets, cash on balance sheet.
• Earnest money of $25,000-$100,000 in escrow signals seriousness and is now common on lower-middle-market deals.
• 60-75 days of exclusivity is reasonable. 120 days reads as a buyer who isn’t ready.
• Keep the LOI mostly non-binding — but the binding sections (exclusivity, confidentiality, expenses, deposit) deserve real legal attention.

What a letter of intent for a business purchase actually does

The LOI accomplishes three things at once. First, it states the buyer’s proposed economic terms (price, structure, working capital, financing). Second, it asks the seller to grant exclusivity so the buyer can spend money on diligence without fear of being shopped. Third, it sets a timeline and process that both sides will follow through to closing.

Most of the LOI is non-binding. Price, structure, escrow, indemnification, working capital target — all of these are subject to definitive agreement. If diligence reveals a problem, the buyer can renegotiate or walk. If the seller’s lawyers spot a structural issue, the seller can renegotiate or walk. Non-binding does not mean irrelevant — it means the parties are aligned in principle but the lawyers will document the actual deal.

A few sections are binding. Exclusivity, confidentiality, expense allocation, and the earnest money / deposit terms are typically binding. These are the seller’s protections (no shopping, no leaks) and the buyer’s protections (deposit returned in defined scenarios). Lawyers spend most of their LOI time on these clauses, even though they’re only a small percentage of the document.

The LOI is also a credibility document. Everything in it — the price, the financing detail, the diligence list, the timeline, the legal language, even the formatting — is read as a signal. A sloppy LOI from a name-brand PE firm still gets read seriously. A polished LOI from an unknown buyer with vague financing gets sidelined. Most buyers fall in the middle; getting the LOI right is one of the few levers you fully control.

What every accepted LOI includes

Section 1: Parties and target. Identify the buyer (your acquisition entity, parent company, or sponsor), the seller, and the target business by legal name. If the buyer is a newly-formed acquisition vehicle, name the sponsor or parent and explain the structure. Sellers want to know who they’re actually doing business with.

Section 2: Purchase price and structure. State a clear price — ideally a single number, not a range. Specify whether it’s an asset purchase or stock purchase. Specify whether the price is on a cash-free, debt-free basis with a normalized working capital target. State the consideration mix: cash at close, rollover equity (if any), seller note (if any), earnout (if any). Vague price language is the #1 reason LOIs are rejected as ‘not serious.’

Section 3: Financing. Name the sources. ‘Cash on hand and committed senior debt’ is far stronger than ‘to be financed.’ Attach evidence where possible: equity commitment letter from your fund, term sheet from your lender, recent bank statement showing cash, or proof of available revolver capacity. The financing section is where you separate yourself from less-prepared buyers.

Section 4: Conditions to closing. List the major conditions: satisfactory completion of due diligence, definitive agreement on customary terms, third-party consents (key contracts, regulatory if applicable), no material adverse change. Keep this list short and specific — long, vague condition lists read as escape hatches. Sellers count contingencies as risk.

Section 5: Due diligence scope and timeline. Name the categories: financial, tax, legal, commercial, operational, IT, environmental (if relevant), HR. Commit to a target completion date (typically 45-60 days from LOI signing). Reasonable buyers say ‘we’ve done preliminary review and the diligence below is to confirm’ — this is much stronger than treating diligence as a fishing expedition.

Section 6: Exclusivity. Request 60-90 days of exclusivity (no-shop). During the exclusive period, the seller agrees not to solicit, negotiate, or accept other offers. Buyers who request 120+ days look unprepared. Buyers who request under 45 days often can’t complete diligence and financing in time. 60-75 days is the sweet spot for most lower-middle-market deals.

Section 7: Confidentiality. Either reference the existing NDA (if one is signed) or include a short confidentiality clause. Sellers care about leaks — employees, customers, competitors. A buyer who treats confidentiality casually in the LOI is a buyer who will leak something material later.

Section 8: Earnest money / deposit. On lower-middle-market deals, earnest deposits of $25,000-$100,000 are increasingly standard. The deposit is held in escrow and refundable if the buyer terminates for defined reasons (financing failure, material diligence findings, mutual termination). It’s forfeit if the buyer walks for unjustified reasons. Including a deposit signals you’re serious and meaningfully changes how sellers rank competing LOIs.

Section 9: Definitive agreement deadline. Commit to negotiating and signing the definitive agreement within a specific window (typically 60-75 days from LOI). State that if the parties haven’t signed by the deadline, the LOI terminates unless extended in writing. This protects both sides from open-ended exclusivity.

Price: state a number, not a range

The single biggest mistake buyers make is offering a price range. ‘$8M to $10M’ reads as ‘I will pay $8M and try to negotiate from there.’ Sellers and their advisors immediately anchor to the bottom of the range. If you’re uncertain, do more pre-LOI work, not a wider range. Commit to a number.

The number should reflect what you’ve actually learned so far. By the time you sign an LOI, you’ve usually had access to a CIM, a teaser, a management presentation, and possibly a Q&A with the seller. Your price should be defensible based on that information. Sellers can tell when a buyer pulled a number out of the air vs. when the buyer actually built a model.

Specify the basis: cash-free, debt-free, with a normalized working capital target. ‘$10 million, on a cash-free, debt-free basis, assuming a normalized working capital level of $1.2 million’ is precise. ‘$10 million’ is ambiguous — sellers may assume cash stays in the business; buyers may assume cash gets swept. Spell it out to avoid post-LOI fights.

Be explicit about the consideration mix. ‘$10M total consideration: $8M cash at close, $1M seller note (5-year, 7% interest), $1M earnout over 24 months tied to revenue’ tells the seller exactly what they’re signing up for. Sellers strongly prefer cash, so a higher all-cash number often beats a higher number with significant earnout or seller financing.

Timeline: the 60-75 day sweet spot

Realistic exclusivity periods are 60-75 days for most lower-middle-market deals. Long enough to complete reasonable diligence (financial, legal, commercial, operational, tax), negotiate the definitive agreement, and finalize financing. Short enough that the seller doesn’t feel locked up indefinitely. Buyers who ask for 90-120 days often can’t articulate why they need that much time.

Break the timeline into phases. ‘Days 1-30: financial, tax, and legal diligence; quality of earnings completed by day 30. Days 30-50: commercial and operational diligence; first draft of definitive agreement circulated by day 40. Days 50-65: definitive agreement negotiation; closing conditions confirmed. Days 65-75: signing and closing.’ A phased timeline shows the seller you’ve actually thought through how the deal happens.

Build in flexibility but don’t over-pad. It’s reasonable to allow a one-time extension by mutual written consent. It’s not reasonable to ask for 90 days plus ‘automatic 30-day extensions if needed.’ Open-ended timelines are why sellers walk away from LOIs that look good on paper.

Faster isn’t always better either. Asking for 30-day exclusivity on a $10M deal looks unrealistic unless you’ve already done significant pre-LOI work. Sellers who see a too-short timeline assume you’ll either (a) come back asking for an extension, or (b) skip steps and surface problems late. Match the timeline to the actual scope of diligence.

Financing: name the sources, attach the evidence

‘To be financed’ is a near-instant LOI rejection. If you don’t know how you’re paying for the business, you don’t have a deal — you have an option. Sellers and their advisors discount these LOIs heavily. Even a higher headline price won’t overcome vague financing language.

Strategic and corporate buyers: cite cash and committed credit. ‘The acquisition will be funded from existing cash on hand and our committed $50M revolving credit facility (executed January 2026, $35M currently undrawn).’ Attach the credit agreement summary or a CFO letter if helpful. Strategic buyers usually have the strongest financing story; use it.

Private equity buyers: equity commitment + lender term sheet. ‘The transaction will be funded with $X equity from Fund III (committed capital, $Y of dry powder available) and $Z senior debt under a term sheet from [Lender], dated [date], copy attached.’ PE firms with active funds usually have no trouble here; emerging managers and independent sponsors need to work harder to demonstrate certainty.

Independent sponsors and search funders: be honest, be specific. Sellers know not every buyer has committed capital. What they don’t accept is vagueness. ‘We have soft circles from three institutional LPs totaling $X, and a senior debt term sheet from [Lender]’ is far better than ‘we’re working on financing.’ Independent sponsor LOIs that look like committed capital LOIs win bidding processes more often than people expect.

Buyer credibility: the signals that move sellers

Sellers run a quick credibility check on every LOI. Have they closed deals before? Are their advisors known? Is the diligence list reasonable? Is the legal language clean? Is the timeline realistic? Most sellers’ advisors have done dozens or hundreds of deals — they spot the experienced buyers immediately.

Reference your track record. If you’ve closed similar acquisitions, mention them: ‘The buyer has completed seven acquisitions in the same sector since 2021, with average close timeline of 65 days post-LOI.’ Sellers don’t expect first-time buyers to have a track record, but if you have one, you should use it.

Name your advisors. ‘Counsel: [Law Firm]. Quality of earnings: [Accounting Firm]. Lender: [Bank].’ Sellers’ advisors will recognize the names and update their credibility assessment accordingly. If you’re using top-tier advisors, this is free credibility — use it. If you’re using local advisors, that’s fine too, but pick advisors who have actually done M&A work.

Let your LOI tell a coherent story. Price + financing + timeline + diligence scope + credibility signals should fit together. A $20M offer with $25k earnest money and 120 days of exclusivity from an unknown buyer with no advisors looks incoherent. A $9.5M offer with $75k earnest money, 60 days exclusivity, named lender, and a partner-level commitment looks tight. Coherence is the most underrated LOI feature.

Earnest money: the seriousness signal

Earnest money / deposits in business M&A used to be rare. They’re increasingly common. Sellers and intermediaries have learned that buyers without skin in the game tend to retrade or walk. A $25,000-$100,000 earnest deposit changes the calculus — the buyer has a real reason to close on the terms in the LOI.

Typical structure. $25,000 on smaller deals (under $5M), $50,000 on mid-size deals ($5-15M), $75,000-$100,000 on larger deals ($15-30M). Held in escrow with a neutral third party. Refundable in defined scenarios (failure of a closing condition outside the buyer’s control, mutual termination, seller breach). Forfeit if the buyer walks without justification.

Including earnest money in your LOI is a competitive advantage. If competing LOIs don’t include deposits and yours does, you stand out. Sellers know you’ve already invested money in the deal — you’re unlikely to retrade aggressively, drag out diligence, or walk lightly. The deposit pays for itself in stronger seller commitment to your timeline.

Negotiate the refund triggers carefully. Buyers want broad refund triggers (any unsatisfactory diligence finding). Sellers want narrow triggers (only specific material breaches). The compromise: refundable for material adverse change, financing failure despite reasonable efforts, or material undisclosed liabilities; forfeit for buyer walking for soft reasons. Get this in writing — don’t leave it for ‘definitive documents.’

Sample LOI structure: section by section

Opening: who, what, why. ‘[Buyer Entity] (“Buyer”) is pleased to submit this non-binding letter of intent to acquire [Target Company] (“Target”) from [Seller] (“Seller”) on the terms set forth below. Except for Sections [X-Y], this letter is non-binding and intended to outline the principal terms of a potential transaction.’

Section 1: Transaction structure. Asset purchase or stock purchase. Acquisition vehicle. Treatment of cash, debt, and working capital. Tax treatment if relevant. State the structure clearly — ‘asset purchase by [Newco], a Delaware LLC, on a cash-free, debt-free basis with a normalized working capital target of [$X].’

Section 2: Purchase price. Total consideration as a single number. Allocation across cash, rollover, seller note, earnout. Working capital adjustment mechanic. Example: ‘Total consideration of $10,000,000, comprised of $8,500,000 cash at close, $1,000,000 senior subordinated seller note (5-year, 6% interest, fully amortizing), and a $500,000 earnout payable over 24 months based on EBITDA performance, all subject to working capital adjustment.’

Section 3: Financing. Sources and evidence. ‘The transaction will be funded with [$X] equity from [Fund/Sponsor] and [$Y] senior debt under term sheet from [Lender] dated [date]. Equity commitment letter and lender term sheet are attached as Exhibits A and B.’

Section 4: Conditions to closing. ‘Completion of confirmatory due diligence to Buyer’s reasonable satisfaction. Negotiation and execution of mutually acceptable definitive purchase agreement. Receipt of required third-party consents (including [list]). Absence of any material adverse change.’ Keep it short. Long lists of conditions read as escape hatches.

Section 5: Due diligence. ‘Buyer will conduct customary diligence including financial, tax, legal, commercial, operational, IT, HR, and environmental matters. Buyer expects to complete diligence within 45 days of LOI execution. Buyer’s diligence team includes [advisors].’ Attach a preliminary information request list as an exhibit.

Section 6: Exclusivity (binding). ‘For a period of 60 days following LOI execution, Seller agrees not to solicit, negotiate, or accept any other offers regarding a sale, merger, recapitalization, or similar transaction involving the Target. Seller will inform Buyer promptly of any unsolicited inquiries.’ This section is binding.

Section 7: Confidentiality (binding). Either reference the prior NDA or include a short confidentiality clause covering both information and the existence of the LOI itself. This section is binding.

Section 8: Earnest money / deposit (binding). ‘Buyer will deposit $50,000 with [Escrow Agent] within 3 business days of LOI execution. The deposit will be applied to the purchase price at closing or refunded to Buyer if the transaction does not close due to [defined refund events]. The deposit will be forfeit if Buyer terminates without a defined refund event.’ This section is binding.

Section 9: Expenses (binding). ‘Each party will bear its own expenses regardless of whether the transaction closes.’ Standard. This section is binding.

Section 10: Definitive agreement deadline. ‘The parties will negotiate in good faith with the goal of executing a definitive purchase agreement no later than [date 60-75 days from LOI]. If no definitive agreement is executed by such date, this LOI will terminate (other than the binding sections, which survive).’

After the LOI: what happens next

Day 1-7: kick off diligence. Send the formal diligence request list. Open the data room. Schedule management meetings. Engage the QoE provider. Get the legal team started on entity diligence. The first week is about momentum — sellers notice when buyers move fast post-LOI.

Day 7-30: confirm the model. QoE drives the financial picture. Legal diligence catches contract and structural issues. Commercial diligence (customer calls, competitive review) confirms the growth thesis. By day 30, you should know whether the deal still makes sense at the LOI price.

Day 30-50: definitive agreement. First draft of the SPA / APA from buyer’s counsel. Issues lists from seller’s counsel. Reps and warranties, indemnification, escrow, working capital mechanic — all negotiated in detail. Most retrades that happen at this stage are because the LOI was vague on a key point; tight LOIs prevent most of these fights.

Day 50-75: signing and closing. Finalize disclosures. Confirm financing. Get third-party consents. Execute and close. The cleanest deals close 60-65 days post-LOI. Even routine deals usually close by day 75. Beyond 90 days, something has typically gone wrong.

Conclusion

An accepted letter of intent is the buyer’s ticket to the deal — and the seller’s commitment to actually do it. Sellers don’t pick the highest LOI. They pick the most credible LOI at a fair price. That means a clear price (not a range), named financing sources with attached evidence, a realistic 60-75 day timeline, a focused diligence scope, an earnest money deposit that signals seriousness, and a coherent overall package that tells the seller you actually know how to close. Get those right and you win deals you’d otherwise lose to higher bidders. Get them wrong and the seller goes with someone else — even at a lower headline number.

Frequently Asked Questions

What is a letter of intent for a business purchase?

A letter of intent (LOI) is a 3-6 page document the buyer submits to the seller outlining proposed terms for acquiring the business. It’s mostly non-binding, except for sections like exclusivity, confidentiality, earnest money, and expense allocation. If accepted, the seller stops talking to other buyers for a defined period (typically 60-90 days) while the parties move toward a definitive agreement.

Is a letter of intent legally binding?

Most of it isn’t. Price, structure, and most economic terms are subject to definitive agreement. But specific sections are binding: exclusivity (no-shop), confidentiality, expense allocation, and earnest money / deposit terms. Buyers who treat the LOI casually because ‘it’s non-binding’ often get tripped up by these binding clauses.

How much earnest money should I include in a business LOI?

Common ranges: $25,000 on deals under $5M, $50,000 on $5-15M deals, $75,000-$100,000 on $15-30M deals. Held in escrow, refundable in defined scenarios (financing failure despite reasonable efforts, material adverse change, mutual termination), forfeit if the buyer walks without cause. Including a deposit is a strong credibility signal and increasingly expected on lower-middle-market deals.

How long should the exclusivity period be?

60-75 days is the sweet spot for most lower-middle-market deals. Long enough to complete reasonable diligence and negotiate definitive documents. Short enough that the seller doesn’t feel indefinitely locked up. Asking for 90-120 days often reads as a buyer who isn’t ready. Asking for under 45 days often reads as a buyer who will skip steps.

Should I offer a price range or a specific number in the LOI?

A specific number, almost always. Ranges read as ‘I will pay the bottom of this range and try to negotiate from there.’ Sellers and their advisors anchor immediately to the bottom of any range. If you’re uncertain about price, do more pre-LOI work or accept the uncertainty in your committee approval — don’t pass it through to the seller.

What financing language do sellers want to see?

Named sources with evidence. ‘Cash on balance sheet plus committed senior debt (term sheet from [Lender] dated [date], attached)’ is strong. ‘Equity from [Fund III, $X dry powder] and senior debt from [Lender]’ is strong for PE buyers. ‘To be financed’ or ‘subject to financing’ without specifics is weak and gets LOIs sidelined.

What’s the difference between an LOI and a term sheet?

Largely interchangeable in middle-market M&A. ‘Letter of intent’ is more common in deal documents; ‘term sheet’ is more common in venture and growth equity. Both serve the same function: proposed economic terms, exclusivity, conditions, and process before definitive documents. Some buyers use a short term sheet first and then expand into a full LOI; others go straight to LOI.

Should I include rollover equity, seller notes, or earnouts in the initial LOI?

Yes — if they’re part of your offer, state them clearly and quantify them. ‘$10M total: $8M cash, $1M seller note (5yr, 7%), $1M earnout (24mo, EBITDA-based)’ is precise. Don’t leave consideration mix ‘to be negotiated’ — sellers will assume the worst case (more deferred consideration than you intended).

How do I show buyer credibility if I’m a first-time acquirer?

Lean on your team and your evidence. Name your advisors (counsel, QoE provider, lender). Attach the equity commitment and term sheet. Show the diligence list you’ve already prepared. Provide a coherent timeline. Sellers don’t expect first-time buyers to have a track record, but they do expect a serious package. Vague LOIs from first-time buyers get rejected; tight LOIs from first-time buyers regularly win.

What conditions to closing should I list?

Keep it short and specific: completion of confirmatory due diligence to buyer’s reasonable satisfaction; negotiation and execution of definitive agreement; required third-party consents (list the key ones); no material adverse change. Long, vague condition lists read as escape hatches and signal a buyer planning to retrade.

Can the seller negotiate the LOI?

Almost always. Sellers commonly push back on price (especially the basis — cash-free, debt-free), exclusivity length, deposit refund triggers, conditions to closing, and the definitive agreement deadline. Expect 1-2 rounds of LOI negotiation before signing. The cleaner your initial draft, the fewer rounds you’ll need.

What happens if the deal doesn’t close after the LOI is signed?

Most binding sections survive: confidentiality continues, expenses remain each party’s responsibility, and the deposit is refunded or forfeit per the LOI’s terms. Exclusivity ends. Both parties go their separate ways. Some LOIs include a tail period during which the seller can’t accept an offer from anyone introduced through the buyer’s process — rare in middle-market, more common in larger transactions.

About the Author

Christoph Totter is the founder of CT Acquisitions, a buy-side deal origination firm headquartered in Sheridan, Wyoming. CT Acquisitions sources founder-led businesses for 75+ private equity firms, family offices, and search funds across the U.S. lower middle market ($1M–$25M EBITDA). Christoph writes about M&A from the perspective of someone on the phone with both sides of the deal table every week. Connect on LinkedIn · Get in touch