How to Make Your LOI Stand Out

There is a version of this conversation that starts with the purchase price. Most buyers write it that way. Fill in a number, check the exclusivity box, send it over, and hope for the best.

That is the wrong version.

Sellers and their brokers read dozens of LOIs. The ones that get accepted are not always the highest offer. They are the ones that signal the buyer actually knows what they are doing, has real financing lined up, and will not blow up the deal somewhere between diligence and closing. Your LOI is your first serious impression. And it does more work than most buyers give it credit for.

Here is how to write one that gets taken seriously.

What an LOI Actually Signals to a Seller

An LOI is not just a price sheet. It is a credibility document.

When a seller or broker reads your letter of intent, they are running through three questions, whether they realize it or not. Can this buyer actually close? Will they waste my time in due diligence? And will they be reasonable to work with for the next 60 to 90 days?

A weak LOI answers all three poorly. Vague financing language, no mention of deal structure, a price floating out there with zero context. It reads like a buyer who has never done this before and is throwing out a number to see what sticks. A strong LOI answers those questions before they are even asked. That is the difference between getting a signed acceptance and getting a polite pass.

Run the Debt Service Model Before You Submit Anything

The biggest LOI mistake is not the language. It is submitting the wrong number.

Before your letter of intent goes anywhere near a seller, you need to run the SBA debt service model. Take the adjusted EBITDA or seller’s discretionary earnings, subtract the annualized debt payments on your proposed SBA 7(a) loan, and check whether the remaining cash flow clears the SBA’s technical minimum of 1.25x. But here is the part that matters: that 1.25x is the SBA floor, not the Regalis floor. We target 2x debt service coverage on a clean deal, and we treat 1.5x as the real working minimum. Anything between 1.25x and 1.5x is a deal that might get approved by a lender but will leave you with almost no margin for a slow month, a surprise repair, or any of the other things that happen in real businesses.

Say you are looking at a commercial cleaning company with $350K in SDE, listed at $1.4M. At that price, your SBA loan payment on a 10-year term comes out to roughly $185K per year. That leaves $165K to cover debt service, which is only 1.19x. The deal does not work at ask. Not even close to the 1.5x floor we require, let alone the 2x target. Either the price needs to come down or there is a meaningful seller note structure that absorbs some of the payment burden and pushes coverage back above 1.5x.

Know this before you submit. If your number is lower than list, explain it. Sellers are far more receptive to a lower offer with a clear rationale than a lower offer with silence.

How to Structure Your Offer So It Gets Read

The letter of intent itself should cover four things clearly: purchase price, deal structure, financing plan, and exclusivity period.

Purchase price. State it as a specific number. Not a range. A range signals you are not serious yet. “$1.2M” is a real offer. “$1.1M to $1.3M depending on diligence” is not.

Deal structure. Break down how the $1.2M gets paid. In most SBA deals, the baseline starts at something like $1.08M from the SBA 7(a) loan (90%) and $120K equity injection (10%). But that baseline alone is not a complete structure. The 90/10 split is just the SBA scaffolding. What actually makes the deal work, what de-risks it for you as the buyer, is layering a seller note on top of that foundation and building in working capital. On most of the deals we run, we target a 10-year full standby seller note at 0% interest. State that directly in the LOI. It tells the seller you know what you are talking about and have thought this through. The seller note is not a “nice to have” tacked on at the end. It is a core piece of the structure that improves your debt service coverage, reduces your out-of-pocket exposure, and often makes the difference between a deal that pencils and one that does not.

(Side note: this is also where working capital comes in. SBA loans can include working capital in the total loan package, and if you are planning to fold that into your financing, mention it here. We will get to the details below, but raising it early avoids an awkward surprise conversation at the wrong moment.)

Financing plan. Name the financing vehicle. SBA 7(a), 10-year term, through a preferred SBA lender. If you have already had a pre-qualification conversation with a lender, say so. “Pre-qualified with [Lender] for SBA 7(a) financing up to $X” carries real weight. It tells the broker this deal will not fall apart in the financing phase.

Exclusivity period. Request 30 to 60 days. Shorter signals confidence. Longer than 60 days will almost always get pushback.

What to Say About Seller Notes in Your LOI

A lot of buyers skip this entirely.

That costs them deals.

If you need a seller note to make the deal work, or if you want one to improve debt service coverage, the LOI is the place to raise it. Not during diligence. Not at closing. Now. Bring it up early with the right framing. Something like: “To ensure a clean financing structure and a successful close, we are requesting a seller note of $X, structured as a 10-year full standby note at 0% interest, subject to SBA lender approval.”

That framing does three things. It explains why you want it. It shows you understand SBA standby requirements. And it signals that this is standard practice, not a red flag. On deals we work, we get a full standby seller note structure on more than 90% of closed transactions. It is not unusual. But you need to ask for it clearly and early or it becomes a negotiation problem later when everyone is already deep into diligence and the closing clock is ticking.

Proof of Execution Is What Separates Good LOIs from Great Ones

So the structure is right, the number is defensible, and the seller note language is clean. What else?

Attach or reference a brief buyer profile. One page. Your professional background, why this business, your acquisition criteria, and your financing readiness. Sellers want to know who is buying their business. They spent years building it. A faceless offer from an unknown buyer is harder to accept than one from someone who has been specific about their intent and qualifications.

Include your equity injection source. “Buyer has $X available for equity injection from liquid personal funds” is meaningful. It removes one of the biggest seller fears, that the deal will collapse because the buyer cannot fund their share.

If you are working with an acquisition advisor, note it. Not as a credential flex, but because it signals to the broker that there is a professional in the process who has done this before. Brokers prefer working with buyers who have representation. It makes their job easier and the close more reliable. We have seen this shift the dynamic of a deal more times than you would expect.

Common LOI Mistakes That Kill Deals Before Diligence

The offer was fine. The execution killed it.

Submitting too slow. If a broker asks you to get something in by end of week, get it in by Wednesday. Speed signals seriousness. Slow buyers get passed over for faster ones with weaker offers. We have watched it happen.

Vague contingencies. “Subject to satisfactory due diligence” is fine. “Subject to buyer’s complete satisfaction with all aspects of the business” is a red flag. It tells the seller you are leaving yourself every possible exit. Be specific about what diligence will cover.

Missing the asset vs. equity distinction. Your LOI should specify whether you are buying assets or equity. In SBA deals, it is almost always an asset purchase. SBA strongly prefers asset purchases because they provide cleaner collateral. If your LOI is silent on this, you look inexperienced.

No mention of working capital. Common omission. SBA loans can include working capital in the loan package, typically 2 to 6 months depending on the business type. If you are planning to fold that into your financing, say so in the LOI. Working capital is non-negotiable for a real transition. Leaving it out invites a surprise conversation later.

Sending a template that looks like a template. Sellers and brokers have seen every boilerplate LOI format that exists. If yours reads like you downloaded it from a website and filled in the blanks, it reads as low effort. Reference the specific business. Use their actual financials. Make it clear you have done real analysis on this particular deal.

All of that matters. But none of it matters if you lose momentum after the LOI gets signed.

What Happens After the LOI Gets Accepted

Acceptance is not the finish line. It is the starting gun.

Once your letter of intent is signed and you are in exclusivity, you have a narrow window to complete due diligence, finalize your SBA lender, and move toward a purchase agreement. Most exclusivity periods run 30 to 60 days. That is not a lot of time.

The buyers who close are the ones who start diligence prep before exclusivity even begins. They have their document request list ready. They have their SBA lender relationship active. They are not scrambling to find an attorney or a CPA the day after the LOI is signed. Your letter of intent gets you in the room. What you do in the next 45 days determines whether you actually close.

Frequently Asked Questions

How long should an LOI be for a business acquisition?

One to two pages. Longer is not better. Cover purchase price, deal structure, financing terms, and exclusivity clearly. Anything beyond that belongs in the purchase agreement. A concise letter of intent reads as confident. A five-page LOI often introduces problems you do not need to create before diligence even starts.

Do you need an attorney to write an LOI?

Not always, but having an acquisition attorney review it before you submit is worth the cost. An attorney familiar with SBA deals can flag language that creates unintended obligations or leaves gaps that cause problems during closing. The LOI is generally non-binding on most terms, but it sets expectations for everything that follows.

Should your LOI mention SBA financing specifically?

Yes. Naming SBA 7(a) as your financing vehicle tells the broker and seller exactly what the deal structure looks like and sets realistic expectations for the timeline. SBA deals typically take 60 to 90 days to close from LOI to funding. Hiding the financing vehicle and surprising the seller later creates friction you do not need.

How do you make your LOI stand out if you are a first-time buyer?

Focus on financing readiness and deal specificity. Show that you have done the math on their business, that you have your equity injection documented, and that you are already working with a lender. First-time buyers lose deals by looking unqualified, not by being first-time buyers. A well-prepared LOI closes that gap fast.

Is the purchase price in an LOI negotiable after signing?

Yes, but renegotiating price after the LOI is signed is a serious credibility risk. If due diligence surfaces material issues, a price adjustment is legitimate and expected. But adjusting price simply because you felt like it after you won exclusivity will damage the relationship and may kill the deal. Submit a price you can defend and stick to it unless diligence reveals a real reason to revisit.

Thinking About Making an Offer on a Business?

Regalis Capital is a buy-side M&A advisory firm. We help clients find deals, structure LOIs, negotiate seller notes, and manage the SBA process from the first call to funding.

If you are getting ready to submit an offer and want a team that has been through this process hundreds of times, start here.