LOI checklist
| Term | What to pin down | Binding? |
|---|---|---|
| Price and form | Cash at close, seller note, earn-out, rollover - in dollars | No |
| Earnings basis | Which SDE/EBITDA number and which adjustments | No |
| Structure | Asset vs stock; proposed allocation principles | No |
| Working capital | Target level or method; what counts | No |
| Escrow / holdback | Amount, duration, release conditions | No |
| Your role | Employment/consulting term, pay, non-compete length and area | No |
| Financing | Is the buyer relying on SBA or other debt? Proof of funds | No |
| Exclusivity (no-shop) | Length (shorter is better for you) and extension terms | Yes |
| Confidentiality | Covers your data and employees | Yes |
| Expenses and governing law | Each side pays its own | Usually yes |
Get the letter of intent template
An editable, non-binding LOI covering price, cash at close, seller note, earn-out, working capital, exclusivity and your post-sale role. It appears on this page as soon as you submit.
Four clauses owners regret
- Long exclusivity with no milestones - you are off the market while the buyer re-trades.
- “Normalized” working capital left undefined - becomes a price cut at closing.
- Allocation left for later - the buyer pushes value into ordinary-income classes. See asset vs stock.
- Vague earn-out - see earn-outs.
Know your number first
Sourced range for your trade in 60 seconds, no email needed.
Frequently asked questions
Is a letter of intent legally binding?
Mostly not. Exclusivity, confidentiality and expense clauses are usually binding; price and terms are not until the purchase agreement is signed.
How long should exclusivity be?
As short as the buyer will accept for its diligence plan, with extensions tied to milestones.
Should my attorney review the LOI?
Yes - it frames every later negotiation and costs far less to fix now.
Sources
- IBBA / M&A Source / Pepperdine Market Pulse, Q2 2026 highlights (accessed 2026-09-23)