Letter of Intent for Business: Template and Examples

A letter of intent (LOI) is a short document that sets out the main terms of a proposed deal, such as buying a business, leasing space or signing a large supply contract, before the parties spend money on a full agreement. Most of a business LOI is non-binding, but a handful of clauses, usually confidentiality and exclusivity, are written to bind both sides from the moment they sign. Getting that split right is the single most important part of any letter of intent template.

Below you will find what an LOI is for, which terms are binding, a fill-in letter of intent template for a small business purchase, a filled-in example with real-looking numbers, and the mistakes that cost buyers and sellers money. This is general information, not legal advice.

What is a letter of intent for business?

An LOI is a roadmap. It confirms that the parties agree on the headline terms and want to proceed, and it sets the rules for the next stage: due diligence and drafting the definitive agreement. According to Baker McKenzie's US private M&A guide, a letter of intent in the US is generally non-binding except for specific provisions such as exclusivity and confidentiality.

LOIs are closely related to a memorandum of understanding. In practice, LOIs show up in transactions (purchases, leases, large orders), while MOUs show up in collaborations and partnerships.

Common uses of a letter of intent

Situation	What the LOI covers	Definitive agreement that follows
Buying a small business	Price, asset or stock deal, financing, due diligence period, exclusivity	Asset or stock purchase agreement
Commercial lease	Rent, term, build-out allowance, renewal options	Lease
Large supply or service deal	Volumes, pricing, start date, pilot terms	Supply agreement or service agreement
Joint venture	Contributions, ownership split, governance	JV or operating agreement
Hiring or partnering	Role, equity or fee, start date	Employment, partnership or consulting agreement

Binding vs non-binding terms in a letter of intent

Write the LOI so that a reader can tell instantly which sections bind. A typical split:

• Non-binding: purchase price, deal structure, payment terms, earnouts, seller financing, closing date, employment of the seller after closing, conditions to closing.
• Binding: confidentiality, exclusivity (no-shop), access to information for due diligence, each party paying its own costs, governing law, and the clause stating which sections are binding.

Exclusivity is where most of the leverage sits. Once signed, the seller cannot talk to other buyers for the agreed period. A Harvard Law School Forum analysis notes that courts have treated breaches of exclusivity seriously because money damages often cannot repair a lost deal. Typical small business exclusivity windows run 30 to 90 days.

Letter of intent template (business purchase)

Adapt the bracketed parts. Keep it to two or three pages on letterhead.

1. Heading: date, buyer name and address, seller name and address, "Re: Letter of Intent to Purchase [Business Name]."
2. Transaction: "Buyer proposes to acquire substantially all of the assets of [Business], free of liens, including equipment, inventory, customer lists, intellectual property and goodwill." State asset or stock purchase.
3. Purchase price: total price, and how it is paid (cash at closing, SBA loan, seller note, earnout).
4. Working capital and inventory: whether inventory is included at a set amount or counted at closing; whether receivables stay with the seller.
5. Excluded assets and liabilities: cash, receivables, debts and tax liabilities that stay with the seller.
6. Due diligence: length of the review and the documents the seller will provide (three years of tax returns, profit and loss statements, balance sheets, leases, key contracts).
7. Conditions: financing approval, landlord consent to lease assignment, satisfactory due diligence, definitive agreement.
8. Transition: seller training period and any consulting agreement.
9. Non-compete: proposed scope, area and duration, to be finalized in the purchase agreement.
10. Exclusivity (binding): number of days, and what ends it early.
11. Confidentiality (binding): reference any existing NDA.
12. Expenses (binding): each party pays its own costs.
13. Non-binding statement: which sections bind; everything else depends on a definitive agreement.
14. Expiration: the offer lapses if not signed by a set date.
15. Signatures: both parties, with names, titles and dates.

Filled-in letter of intent example

Illustrative numbers for a buyer purchasing an established commercial cleaning company:

Term	Example
Business	BrightLine Commercial Cleaning LLC
Structure	Asset purchase
Seller's discretionary earnings (last 12 months)	$310,000
Purchase price	$850,000 (about 2.7x SDE)
Buyer equity (cash)	$85,000
SBA 7(a) loan	$680,000
Seller note	$85,000, 10 years, 6% interest
Inventory	Supplies included up to $15,000
Receivables	Retained by seller
Due diligence	45 days
Exclusivity	75 days
Transition	60 days of training at no extra cost

Two financing details matter here. Under the SBA's SOP 50 10 8, a seller note counts toward the buyer's required equity injection only if it is on full standby for the life of the SBA loan and covers no more than half of the required injection; summaries such as this client alert from Whiteford explain the change. SBA updated its SOP again for loans numbered from October 2026, so confirm current rules with your lender. And the receivables clause matters for the seller: invoices issued before closing are still the seller's money, so the seller should run a final accounts receivable aging report and keep collecting after the sale.

How to write a letter of intent: step by step

1. Value the business first. Use earnings multiples and comparable sales; our guide on how to value a small business walks through SDE and EBITDA methods.
2. Sign an NDA before asking for detailed financials.
3. Draft the headline terms using the template above.
4. Mark binding sections clearly and add a non-binding statement.
5. Set a realistic timeline that fits your lender's process.
6. Have a lawyer review, then send with an expiration date.
7. Track every deadline once signed: diligence, financing, exclusivity end.

Seller and buyer checklist before signing an LOI

Seller should confirm	Buyer should confirm
Buyer has proof of funds or lender pre-qualification	Seller's tax returns match the profit and loss statements
Exclusivity is capped and ends if milestones slip	The earnings figure you are paying a multiple on, such as SDE or EBITDA, is supported by add-back evidence
Price can change only for defined reasons	Key customer and supplier contracts can be assigned
Receivables, deposits and cash stay with the seller unless priced in	Lease can be assigned or a new lease is available
Transition period and consulting pay are realistic	Financing timeline fits the diligence window (see our SBA loans guide)
Non-compete scope is reasonable	Non-compete covers the area and services that matter

Both sides should also agree, at least in outline, how customer deposits and prepaid work are handled. If the seller has collected $12,000 in deposits for jobs the buyer will finish after closing, the buyer should receive a $12,000 credit against the price, or the seller should finish and invoice those jobs before closing. Spelling this out in the LOI saves an argument at the closing table.

Letter of intent for a lease or service contract

For a commercial lease, the LOI covers base rent per square foot, rent escalations, lease term, free rent, tenant improvement allowance, permitted use, renewal options and who pays common area charges. For a service or supply deal, it covers pricing, volumes, service levels, start date and a pilot period. In both cases, the same rule applies: make price and obligations non-binding until the lease or service agreement is signed, and make confidentiality binding.

Common letter of intent mistakes

• Vague price adjustments. "Price subject to adjustment after diligence" invites a last-minute cut. Define what can change the price.
• Long exclusivity with no exit. Sellers should cap exclusivity and end it if the buyer misses milestones.
• Unclear treatment of receivables, deposits and prepaid jobs. Customer deposits the seller collected for work the buyer will perform should be credited to the buyer at closing.
• Ignoring asset allocation. How the price is split among equipment, goodwill and non-compete changes taxes for both sides.
• No expiration. An LOI without a deadline lets the other side wait for a better offer.

How long should a letter of intent be?

Two to four pages is typical for a small business purchase. Shorter letters leave too much open, which pushes disputes into the expensive drafting stage; longer ones start to look like the purchase agreement and take weeks to negotiate. The test is simple: every term that would change whether you do the deal, or at what price, should be in the LOI. Detailed representations, warranties and indemnity mechanics can wait for the definitive agreement, as long as the LOI flags any unusual protection you will need, such as a holdback of part of the price for 12 months.

What to do if a deal falls apart after the LOI

Check the binding clauses: return or destroy confidential documents as required, respect any remaining non-solicitation period and confirm in writing that exclusivity has ended. If the other party breached exclusivity or confidentiality, talk to a lawyer promptly. If a buyer or seller simply walked away under the non-binding terms, there is usually no claim, which is why the expense clause matters. If you are the seller, keep running the business normally; for the full process, see our guide on how to sell a small business.

After closing, the buyer will need clean invoices from day one under the new ownership and tax ID. Set up your invoice format with our free invoice generator: no sign-up, and every invoice downloads as a PDF.