Searchers who eventually close sign an average of 2.5 letters of intent to get there, and the LOI is where most of the deal's real economics get set, months before lawyers draft anything definitive. A thin LOI feels faster and costs more later: every material term left "for the purchase agreement" becomes a negotiation you conduct after spending tens of thousands on diligence, with your leverage draining daily. This checklist covers what belongs in the document, term by term.
Purchase price and its basis: the number, and what it assumes (a normalized EBITDA or SDE figure, stated). If diligence moves the basis, the price conversation reopens honestly instead of angrily. Structure: asset vs stock purchase (asset is the small-deal default for liability and tax reasons; say it now, because it changes the seller's tax outcome and therefore their real price). Consideration mix: cash at close, seller note (amount, rate, term, standby status if SBA-financed; under current rules, injection-qualifying notes are on full standby), earn-out if any (metric, cap, period), and any seller rollover. Working capital: a peg will be set, and the methodology for setting it (trailing twelve-month average is the common baseline). The single most-fought closing item; two sentences in the LOI prevent it. What is included and excluded: real estate (owned or leased, and lease terms expected), vehicles, inventory treatment, personal items, cash and AR treatment.
Exclusivity: 60-90 days is standard for sub-$10M deals; this is the term you are actually buying with your LOI, so make it explicit, with an extension mechanism tied to lender timelines. Diligence access: scope of records, employee and customer access rules (usually gated until late diligence), and site visit rights. Timeline: target dates for QoE completion, financing commitment, purchase agreement draft, and close. Dates create accountability on both sides. Financing contingency: stated plainly, including SBA if applicable; sellers and brokers price certainty, and hiding the contingency erodes trust when it surfaces anyway. Confidentiality and non-solicitation of employees during the process.
Seller transition: expected duration and intensity (full-time month one, on-call after, or whatever fits), and whether compensated. Non-compete: scope, geography, years. Agree the shape now; it is a closing-table grenade otherwise. Key employee intentions: any retention expectations worth flagging early.
Anything you have not thought through, drafted as if binding. The LOI should be explicitly non-binding except exclusivity, confidentiality, and (sometimes) a breakup provision, and every experienced counsel will confirm the non-binding language while reminding you that walking back a stated term still spends real trust. Write only terms you mean.
First, speed wins deals: in this market the buyer whose LOI arrives fast, complete, and credibly financed routinely beats a marginally higher offer, because sellers price the probability of reaching the closing table. Second, the LOI is a trust document as much as a legal one; the seller is deciding whether the next 90 days with you will be honest. A complete, plain-English LOI is your first proof.
Download the formatted checklist below, and have deal counsel who works your size range review your draft before it goes out; matching you to exactly that counsel is what Phase 03 of the Accelerator does.
A Phase 03 tool from Five Experts. Related: the Post-LOI Due Diligence Checklist (what starts the day this signs), Questions to Ask a Seller Before You Sign an LOI, and the SBA 7(a) Playbook (the financing terms your LOI must anticipate).
