Writing a Letter of Intent to Buy a Business That Works

Writing a letter of intent (LOI) to buy a business is a crucial step in the acquisition process. This guide will walk you through the process, providing three unique templates and sharing tips from my personal experience to help you create a compelling and effective LOI.

Key Takeaways

  • Purpose of an LOI: Outlines the key terms of the proposed transaction.
  • Essential Elements: Buyer and seller information, business description, purchase price, terms, and conditions.
  • Templates Provided: Three unique templates tailored for different scenarios.
  • Personal Tips: Insights from my experience in writing effective business letters.
  • Real-Life Examples: Practical applications to enhance understanding.

Understanding the Purpose of a Letter of Intent





A letter of intent serves as a preliminary agreement between the buyer and the seller, outlining the basic terms and conditions of the proposed business transaction. It’s not legally binding but demonstrates the buyer’s serious intent and can help both parties agree on fundamental aspects before moving forward.

Essential Elements of an LOI

  • Buyer and Seller Information: Include full names and contact details.
  • Description of the Business: Clearly outline what is being purchased.
  • Purchase Price and Terms: Specify the proposed price and payment terms.
  • Due Diligence Period: Indicate the time frame for due diligence.
  • Confidentiality Clause: Ensure sensitive information is protected.
  • Non-Binding Nature: State that the LOI is not a legally binding document.

Template 1: General Letter of Intent

[Your Name]

[Your Address]
[City, State, ZIP Code]
[Email Address]
[Phone Number]
[Date]

[Seller’s Name]
[Seller’s Address]
[City, State, ZIP Code]

Dear [Seller’s Name],

I am writing to express my intent to purchase [Business Name], located at [Business Address]. This letter outlines the preliminary terms and conditions for the proposed transaction.

  1. Purchase Price: $[Proposed Amount]
  2. Payment Terms: [e.g., 50% upfront, balance over 12 months]
  3. Due Diligence: 30 days from the date of this letter
  4. Confidentiality: All discussions and information will remain confidential
  5. Non-Binding: This letter is not a legally binding agreement

I look forward to discussing this proposal further.

Sincerely,
[Your Name]

Tips from Personal Experience

From my experience, clarity and brevity are key. Ensure all essential terms are covered, but avoid overwhelming the reader with too much detail at this stage.

Template 2: LOI with Financing Contingency

[Your Name]

[Your Address]
[City, State, ZIP Code]
[Email Address]
[Phone Number]
[Date]

[Seller’s Name]
[Seller’s Address]
[City, State, ZIP Code]

Dear [Seller’s Name],

I am pleased to submit this letter of intent to purchase [Business Name]. This letter outlines the terms and conditions under which I propose to acquire the business.

  1. Purchase Price: $[Proposed Amount]
  2. Payment Terms: [e.g., 30% upfront, balance through financing]
  3. Financing Contingency: This offer is contingent upon securing financing
  4. Due Diligence: 45 days from the date of this letter
  5. Confidentiality: All information exchanged will remain confidential
  6. Non-Binding: This letter is not a legally binding agreement

I am confident that we can reach a mutually beneficial agreement.

Best regards,
[Your Name]

Real-Life Example

In one instance, including a financing contingency helped me secure the necessary funds without committing to the purchase prematurely. This approach can also reassure the seller of your intent while allowing time to secure financing.

Template 3: LOI for Partial Purchase

[Your Name]

[Your Address]
[City, State, ZIP Code]
[Email Address]
[Phone Number]
[Date]

[Seller’s Name]
[Seller’s Address]
[City, State, ZIP Code]

Dear [Seller’s Name],

This letter serves as an expression of my intent to purchase a [specific percentage]% stake in [Business Name]. The following outlines the preliminary terms for this transaction.

  1. Purchase Price: $[Proposed Amount] for [percentage]% ownership
  2. Payment Terms: [e.g., lump sum payment]
  3. Due Diligence: 30 days from the date of this letter
  4. Management Role: [e.g., active/investor role]
  5. Confidentiality: All information will remain confidential
  6. Non-Binding: This letter is not a legally binding agreement

I look forward to further discussions.

Sincerely,
[Your Name]

My Opinion

Partial purchases can be beneficial for both parties. It allows the buyer to gain a foothold in the business while the seller retains some control and potential future profits.

Additional Tips for Writing an LOI

  1. Be Specific: Clearly outline the terms to avoid misunderstandings.
  2. Stay Professional: Use formal language and maintain a respectful tone.
  3. Follow Up: After sending the LOI, follow up to discuss any questions or concerns.

Table: Key Components of an LOI

ComponentDescription
Buyer InformationFull name, address, contact details
Seller InformationFull name, address, contact details
Business DescriptionClear description of the business being purchased
Purchase PriceProposed amount for the purchase
Payment TermsDetails of how and when the payment will be made
Due DiligenceTime frame for conducting due diligence
ConfidentialityClause to protect sensitive information
Non-Binding NatureStatement that the LOI is not legally binding

Final Thoughts

Crafting a letter of intent to buy a business requires careful consideration and a clear presentation of terms. By using the templates provided and incorporating tips from my personal experience, you can create an LOI that effectively communicates your intent and paves the way for a successful business acquisition.