You signed the letter of intent. The seller signed back. Everyone shook hands, or more likely, sent congratulatory emails. Now what?
This is the part of the acquisition process where most first-time buyers slow down, get disorganized, and either lose the deal or close one they should not have. The 60 to 90 days between a signed LOI and the closing table are the most consequential stretch in the entire transaction. And most buyers are not prepared for how fast things need to move.
Here is exactly what happens after signing an LOI, in the order it actually occurs, and what you need to be doing at each stage.
The Exclusivity Window Starts Immediately
The moment your LOI is countersigned, the clock starts. Not metaphorically. Literally.
Most LOIs include an exclusivity period of 30 to 60 days. During this window, the seller cannot market the business or entertain other offers. You have protected deal position, and that is the whole point of getting the LOI signed before doing extensive work.
But exclusivity cuts both ways. You are now on the hook to move. Sellers get nervous fast. If they go two weeks without hearing from you or your team, they start wondering whether you are serious. We have watched deals die in the post-LOI silence more often than people realize. Not because anything went wrong with the business, but because the buyer went quiet and the seller panicked.
Get your advisors briefed and your checklist built before the ink is dry. Not after.
Lender Engagement Is the First Move
If you are using SBA 7(a) financing (which handles the majority of business acquisitions in the $500K to $5M range), your lender needs to know the deal is under LOI immediately. Same day, if possible.
Most SBA lenders will want to see the LOI itself along with the business’s last 2 to 3 years of tax returns, a current profit and loss statement, and the seller’s discretionary earnings calculation. They are running a preliminary credit box check before they issue a term sheet.
The two numbers they care about most: your debt service coverage ratio (DSCR) and the equity injection amount. SBA requires a minimum 10% equity injection on acquisitions. On a $1.2M deal, that is $120K. The DSCR target is 2.0x, though we have seen deals get through at 1.5x when there are documented growth drivers or clear operational synergies. Anything below 1.5x is dangerous territory, and at 1.25x, you are essentially asking the lender to bet on a margin of error that does not exist.
Do not wait to engage your lender. Weeks lost here become timeline problems at the end, and by “the end” we mean the part where your exclusivity is expiring and everyone is stressed.
Due Diligence Begins in Parallel
While your lender starts underwriting, you start digging.
Due diligence is the process of verifying that the business you agreed to buy is actually the business being described. It covers financials, operations, legal, customers, contracts, and employees. The depth depends on deal size and business type, but on any acquisition worth doing, you are running a serious process.
A solid due diligence checklist for an SBA acquisition covers:
- Three years of business tax returns, matched against the P&L statements you were shown during the deal process
- Bank statements for the same period, cross-referenced against reported revenue (this is proof of cash, and if the numbers do not tie, that tells you something important)
- Accounts receivable and payable aging reports
- Customer concentration analysis: if the top 3 customers represent more than 40% of revenue, that is a material risk to flag
- All material contracts, including leases, vendor agreements, customer agreements, and non-competes
- Payroll records and employee agreements
- Any pending or threatened litigation, along with the seller’s representations on it
- Licenses, permits, and certifications required to operate
Your attorney should be building out the asset purchase agreement (APA) simultaneously. The APA is the actual legal document that transfers the business. It needs to reflect exactly what you are buying, what liabilities you are assuming (typically none in an asset purchase), and what the seller’s representations and warranties are.
Side note: the due diligence request list and the APA drafting should be happening at the same time, not sequentially. Buyers who finish diligence and then start the APA lose weeks they cannot afford.
The Seller Note Conversation
Most SBA acquisitions involve a seller note. This is where the seller carries a portion of the purchase price as a loan from them to you, subordinated behind the SBA loan.
Here is how we typically structure it: the seller note goes on full standby for 10 years at 0% interest. Zero payments to the seller for the duration of the SBA loan term. We achieve this structure on over 90% of the deals we work on.
Sellers often push back initially. They expected to walk away at closing with a single check for the full amount. Part of your job in the post-LOI period is walking the seller through why this structure is standard, why the SBA requires it for highly leveraged deals, and why it actually protects them too. A business that can comfortably service its debt is more likely to remain solvent and pay them back eventually.
Get this conversation done early. Seller note disputes that surface in week 8 of a 10-week exclusivity window create last-minute chaos that kills otherwise good deals.
What the SBA Lender Is Actually Doing
So that covers your side of the table. The lender has their own parallel workstream, and it matters.
They will order a business valuation. The borrower typically pays for this, usually $2,000 to $5,000 depending on the deal. The valuation needs to support the purchase price you agreed to in the LOI. If the third-party valuation comes in below your purchase price, you either renegotiate or make up the difference in cash.
They will also order background checks, run your personal financial statement, review your business plan (some lenders require one for SBA deals, some do not), and assess your personal credit. SBA lenders generally want to see a 680+ FICO, though requirements vary by lender.
Once they are satisfied, the lender issues a conditional commitment letter. Sometimes called a credit approval. This is not a final loan approval. It is an approval subject to conditions: completed appraisal, clear title, executed APA, satisfactory lease assignment, and so on.
Each condition has to be cleared before closing. Some are easy. Some take weeks.
The Lease Assignment Problem
Commercial leases are one of the most underappreciated friction points in the entire post-LOI process.
When you buy the assets of a business, you are not automatically assuming the existing lease. The landlord has to consent to a lease assignment or sign a new lease with you as the tenant. Most SBA lenders require a lease term that extends at least 10 years (to match the loan term), either through the remaining lease period or through option periods. If the current lease has 4 years left with no options, you have a problem that needs solving before the lender will close.
Some landlords cooperate immediately. Others take weeks to respond, request financial statements, demand personal guarantees, or try to use the assignment as leverage to raise the rent. We have seen landlords use a $200-per-month rent bump as a condition of assignment, which sounds minor until you run it through the DSCR model and realize it costs $24,000 over the loan term.
This process cannot be rushed, and it can kill deals if the landlord is uncooperative or the lease terms are unworkable. Start the landlord conversation early. Do not assume it will be a quick signature.
What Can Go Wrong in This Window
A lot, honestly.
Here are the most common reasons deals fall apart between LOI and closing:
The financials do not match. The seller’s representations do not hold up under scrutiny. Tax returns show lower income than the recast P&L suggested. Revenue is more concentrated than disclosed. Expenses were being run personally through the business in ways that inflate SDE artificially. This is exactly why proof of cash matters. If the bank statements do not tie to the tax returns, none of the seller’s numbers are trustworthy.
The DSCR does not clear. After a proper add-back analysis, the real SDE is lower than what was marketed. The debt service model does not hit 1.5x at the agreed purchase price. You either renegotiate the price or kill the deal. There is no gray area here.
The landlord kills it. Landlord refuses assignment, wants a personal guarantee you cannot offer, or wants a rent increase that destroys the economics.
The seller gets cold feet. Happens more than buyers expect. The seller gets emotionally attached again, gets advice from a friend who tells them they underpriced it, or simply decides they do not want to sell to this particular buyer. Having a well-drafted LOI with clear provisions and a real attorney on your side helps here, but it does not guarantee anything since the LOI is mostly non-binding.
Lender timeline overruns exclusivity. SBA deals routinely take 60 to 90 days to close from LOI. If your exclusivity period is only 30 days, you will almost certainly need to request an extension. Get that in writing before the original period expires.
What Happens After Signing an LOI, Day by Day
Here is a rough working timeline for a standard SBA acquisition. Reality rarely follows it cleanly, but it gives you a framework:
Days 1 to 5: Brief lender, send LOI and financials for preliminary review, engage your M&A attorney, send due diligence request list to seller.
Days 6 to 20: Receive and review financial documents, run debt service model, begin APA drafting, lender orders business valuation.
Days 21 to 45: Deeper diligence on operations and legal exposure, negotiate APA terms, resolve seller note structure, start landlord conversation on lease assignment.
Days 46 to 60: Lender issues conditional commitment, begin clearing conditions (appraisal, title, lease, and the rest), finalize APA.
Days 60 to 90: Conditions cleared, loan documents issued, closing scheduled, funds wire, business transfers.
Build in buffer. Expect friction. Move as fast as you can on everything you control, and follow up relentlessly on everything you cannot.
Frequently Asked Questions
How long does it take to close after signing an LOI?
Most SBA-financed acquisitions close 60 to 90 days after LOI signing. Some straightforward deals close in 45 days. Complex transactions with real estate, multiple entities, or landlord complications can run 90 to 120 days. The timeline is largely driven by lender processing speed and how quickly the seller delivers requested documents.
Can a seller back out after signing an LOI?
An LOI is typically non-binding except for specific provisions like exclusivity and confidentiality. A seller can legally walk away in most cases. Your best protection is a well-drafted exclusivity clause, moving fast to demonstrate serious intent, and maintaining a good working relationship with the seller throughout the process.
What is the buyer responsible for paying after signing an LOI?
Typical buyer costs in the post-LOI period include the SBA lender’s business valuation ($2,000 to $5,000), attorney fees for APA drafting and review, equipment inspections if applicable, and any lender-required environmental assessments. These costs typically run $8,000 to $20,000 before you reach the closing table.
What happens to the deal if due diligence finds problems?
It depends on severity. Minor issues are often addressed through price adjustments, escrow holdbacks, or stronger seller representations in the APA. Material issues like undisclosed liabilities, significant revenue misrepresentation, or customer concentration risk are grounds for renegotiating deal structure or walking away. A good advisor helps you triage what is fixable versus what is a deal-killer.
Does the purchase price change after an LOI is signed?
It can. If due diligence reveals that the business performs differently than represented, renegotiating the purchase price is standard practice. Common triggers include add-backs that do not hold up, lower-than-reported revenue, or a third-party valuation below the agreed price. Approach these conversations with data, not emotion.
What Comes Next
The post-LOI process is where acquisitions are won and lost. Most buyers who fail at this stage do not fail because the deal was bad. They fail because they were disorganized, slow, or working with advisors who do not run this process regularly.
We manage this process across dozens of deals every year. We review 120 to 150 opportunities per week to find the ones worth taking to LOI, and then we run the post-LOI process through to close.
If you are at or approaching the LOI stage and want a team that has done this before, start here.