Letter of Intent Sample: What Buyers Get Wrong

There is a version of the LOI conversation that starts with a template. You pull something off Google, plug in a price, maybe adjust the due diligence window, and fire it over to the seller’s broker.

That version gets you in trouble. The letter of intent is where deals get shaped, and the terms you agree to in that two-page document control everything downstream: the financing structure, your negotiating position in the purchase agreement, the closing timeline, and the seller note you will be managing for the next decade. Most letter of intent samples you find online were not built for SBA-financed acquisitions. And that gap between what the template says and what the lender requires is where deals fall apart.

Here is what a real LOI looks like, why the generic versions will cost you, and how to put terms on paper that actually survive underwriting.

What a Letter of Intent Actually Is

A letter of intent is a non-binding agreement between buyer and seller that outlines proposed deal terms before formal due diligence starts. It signals mutual interest, sets the framework for the transaction, and kicks off an exclusivity period where the seller pulls the business off the market while you do your work.

Five core elements show up in every LOI worth sending: purchase price, deal structure, financing contingencies, due diligence period, and exclusivity. Get any one of those wrong and you are either overpaying, losing the deal outright, or heading into a closing with terms your SBA lender will reject.

Non-binding does not mean unimportant. Sellers build real expectations around what you put in writing. The moral weight is significant. Backing away from LOI terms mid-diligence without a legitimate finding kills deals, burns broker relationships, and follows you around a market that is smaller than most buyers realize.

Why Generic Letter of Intent Samples Fall Short

Search “letter of intent sample” and you will find dozens of templates. Most are fine for commercial real estate transactions. A handful have been loosely adapted for business sales. Almost none are structured for SBA-financed acquisitions, which is a problem because SBA deals have specific structural requirements that need to show up in the LOI before you ever get near a purchase agreement.

Here is what the generic templates get wrong.

They ignore seller note standby requirements. On SBA 7(a) deals, the seller note typically needs to be on full standby for at least the first 24 months. No principal, no interest payments to the seller during that window. Some lenders require 10-year full standby at 0% interest. We achieve those terms on more than 90% of our deals. But if your LOI proposes a seller note with interest payments starting at close, you have created a structural problem you will spend weeks trying to unwind (and you may not be able to).

They do not flag equity injection correctly. SBA requires a minimum 10% equity injection from the buyer. Some templates show deal structures implying 5% down. That structure simply does not work through SBA. It is not a negotiation point. It is a regulatory floor.

They use vague working capital language. “Sufficient working capital to be agreed upon at closing” is not language a lender will accept, and a sophisticated seller will read it as a sign you have not done this before. Working capital needs a defined mechanism in the LOI or it turns into a fight at closing when everyone’s patience is already thin.

What to Include in a Proper LOI for a Business Acquisition

A solid letter of intent for an SBA-financed acquisition covers the following. None of this is optional.

Purchase price. State the total consideration. If you are proposing a price adjustment mechanism based on working capital or inventory levels at close, outline the methodology briefly. Do not leave it open-ended.

Structure of consideration. Break down how the purchase price gets funded. For example: $900K SBA loan, $100K buyer equity injection, $200K seller note on full standby. The structure needs to work mathematically and pass a basic DSCR test before you commit it to paper. Side note: this is where running your own numbers matters most, because once the structure is in the LOI, changing it signals uncertainty.

Seller note terms. Specify the amount, the term, the interest rate (often 0% under SBA guidelines), and the standby period. Something like “seller note of $200K, 10-year term, 0% interest, full standby for the standby period required by the SBA lender” is the kind of language that tells the other side you know what you are doing.

Due diligence period. 30 to 60 days is standard. Sellers push for 30. Complex businesses may need 60 to 90. Be honest about what you can actually complete in the window you propose.

Exclusivity period. This should match the due diligence period. You need the seller off the market while you do your work and get your lender engaged.

Financing contingency. The deal is contingent on SBA loan approval. This protects you and is standard for any leveraged acquisition. No lender will be surprised by it.

Confidentiality. A brief reminder that both parties keep deal terms private.

Expiration. Give the seller a deadline to countersign. Five to 7 business days is typical.

Run the Numbers Before You Send Anything

This is where most first-time buyers skip a step that matters more than almost anything else in the process. They draft the LOI, then try to figure out the financing. Wrong order.

Before you send a letter of intent, run a rough debt service model. Confirm the deal clears SBA underwriting at your proposed price and structure. And when you model cash flow, do not just plug in the SDE number from the listing. SDE is a broker-friendly metric. We typically discount it 15% to 50% to get to real owner cash flow after adjusting for add-backs that do not hold up, owner compensation at market rate, and one-time items the seller included to inflate the number.

Say you are looking at a landscaping company listed at $1.5M with $400K in reported SDE. After discounting, you land on real cash flow somewhere around $300K to $340K. That is the number you underwrite against.

SBA loan at 10.5% interest over 10 years on $1.35M (the $1.5M price minus your $150K equity injection) produces annual debt service of roughly $220K. If your adjusted cash flow is $340K, you get a DSCR of about 1.55x. That clears our 1.5x floor, but it is not where we like to be. Our target is 2x. At $300K adjusted cash flow, you are at 1.36x. Below our floor. Most lenders will not touch it either.

Now say the listing is $2M. Your SBA loan jumps to $1.8M. Annual debt service climbs to roughly $295K. DSCR on even the generous $340K adjusted cash flow is about 1.15x. That deal does not work. You either negotiate the price down significantly, increase the seller note to reduce the SBA loan balance, or walk.

Do this math before the LOI goes out. The LOI sets expectations. Walking back a price after offering it creates friction that rarely resolves cleanly.

How to Structure the Seller Note

So that covers the math. The seller note itself deserves its own conversation because it is one of the most negotiable parts of any business acquisition, and the part most buyers underestimate.

On SBA deals, we structure seller notes on full standby at 0% interest. Not sometimes. Routinely. More than 90% of the deals we work on end up with those terms. That is not the starting position sellers prefer, but it is achievable when you frame it correctly and account for it in the overall purchase price conversation. Meet on price, win on terms.

In your LOI, you have two paths. You can specify exact terms: “$250K seller note, 0% interest, 10-year term, full standby per SBA lender requirements.” Or you can use softer placeholder language: “seller note in an amount and on terms to be determined in accordance with SBA lender requirements.” The placeholder gives you more room to negotiate later. The specific version signals competence but can trigger pushback from sellers or brokers who do not understand SBA structure.

We recommend specifying the terms. Brokers who push back on full standby at 0% interest are typically working from a playbook built for conventional deals. Educating them early saves everyone time, and frankly, it saves the deal.

What Happens After Both Sides Sign

Once both parties countersign the letter of intent, the clock starts on your due diligence and exclusivity windows. There is no grace period.

Your immediate priorities, in roughly this order:

Engage your SBA lender and submit a loan package. The LOI is one of the first documents they will ask for. It confirms deal structure and purchase price, and the lender will check whether the terms are workable before going further.

Request the seller’s last 3 years of tax returns, 3 years of P&Ls, and 12 months of bank statements. Those bank statements matter enormously. Proof of cash is the gold standard for financial diligence. If the deposits in the bank account do not tie to the revenue on the tax returns, you have a problem that no amount of seller explanation resolves. If it does not tie, walk.

Commission a quality of earnings analysis if the deal is complex or the SDE figure requires significant add-backs. Lenders scrutinize add-back quality. Heavily adjusted SDE numbers attract extra attention, and for good reason.

Order third-party reports required for SBA lending: environmental assessments, business valuations if your lender requires them. These take time, so get them moving immediately.

Begin drafting the asset purchase agreement with your attorney. The APA is the binding document. Your attorney should have reviewed the LOI before you signed it, and they need to be ready to move fast once signatures are in.

A signed LOI is not a closed deal. It is a starting line.

Getting the Structure Right Without Losing the Deal

The letter of intent is a negotiating document. Buyers who send their first LOI at asking price with zero structural asks leave real money and real protection on the table.

You do not need to lowball aggressively. A few adjustments that carry outsized weight:

Seller note to reduce cash at close. Every dollar of seller financing reduces the SBA loan amount, brings down debt service, and improves your DSCR. With proper structuring, getting to 5% buyer cash at close is achievable on many deals.

Working capital peg. Negotiate a specific working capital target at close. If the business is delivered with less than the agreed peg, the purchase price adjusts downward dollar for dollar. This protects you from a seller who drains receivables or runs down inventory in the months before closing.

Training and transition period. 60 to 90 days of seller involvement post-close, built into the LOI, is standard on SBA deals and expected by lenders. Do not leave it out.

Reps and warranties carveout. Your attorney will handle the details in the APA, but flag known concerns in the LOI if they exist: pending litigation, equipment condition, key customer concentrations.

The goal is not the most aggressive offer. The goal is the most durable one. A deal that works for both sides and clears SBA underwriting without requiring a re-trade that poisons the relationship.

Frequently Asked Questions

What should a letter of intent sample include for an SBA business acquisition?

A proper LOI for an SBA deal should include the purchase price, full deal structure showing SBA loan amount, equity injection, and seller note with standby language, due diligence and exclusivity periods, a financing contingency tied to SBA approval, and a short expiration window. Generic templates almost never cover the SBA-specific structural elements that determine whether your deal can actually close.

Is a letter of intent legally binding?

Most LOIs are explicitly non-binding, with two exceptions: the confidentiality clause and the exclusivity period, which are typically enforceable. Purchase price, structure, and other deal terms are not binding until the asset purchase agreement is executed. That said, walking away from LOI terms without cause based in diligence findings creates real friction and can kill the deal entirely.

How long should a letter of intent be for a business acquisition?

Two to 4 pages, give or take. Detailed enough to clearly establish deal terms and structural parameters, but not so long it starts functioning as a draft purchase agreement. The LOI establishes the framework. The APA is where every detail gets locked down with your attorney.

What is a standard due diligence period to put in a letter of intent?

For most small business acquisitions in the $500K to $5M range, 30 to 60 days is standard. If the business has multiple revenue streams, requires environmental assessments, or needs equipment appraisals, 60 to 90 days is more realistic. Build in enough time to complete your financial review and get through initial SBA lender evaluation. Rushing diligence to meet an artificially short window is how bad deals close.

Can you negotiate after a letter of intent is signed?

You can, but it should be limited to material findings from due diligence. If your financial review turns up unreported liabilities, revenue that does not match the tax returns, or operating issues that were not disclosed, that justifies a price adjustment. Renegotiating simply because you want a better deal after the seller pulled the business off the market is a credibility problem that most sellers and brokers will not tolerate.

Work With a Team That Structures This Every Week

A letter of intent is not paperwork. It is your first real act as an acquirer, and the terms you put in those 2 to 3 pages shape your financing, your position in the APA negotiation, and your first year as a business owner.

Regalis Capital runs a done-for-you acquisition advisory practice. We draft LOIs, run debt service models before they go out, and structure seller notes that make it through SBA underwriting. From first look to close, we manage the process so nothing gets missed and no term gets left on the table.

If you are getting serious about acquiring a business, start here.