What Is a Letter of Intent (LOI) in a Business Acquisition?
The Letter of Intent (LOI) is the bridge between initial interest and a binding purchase agreement. Most of the LOI is non-binding, but the document still shapes the entire deal — including financing, due diligence, exclusivity, and timeline.
What Goes in an LOI
Standard LOI provisions cover purchase price and structure, contingencies (due diligence, financing, regulatory), exclusivity (a no-shop period), timeline, allocation of transaction costs, and confidentiality. The LOI may also identify key personnel retention terms or employment agreements.
Binding vs Non-Binding Provisions
Most LOI terms are non-binding — they describe the intended deal but do not obligate either party to close. Certain provisions are typically binding even at LOI stage: confidentiality, exclusivity, expense allocation. Read carefully which is which.
Financing Contingencies
For buyers using SBA or other commercial financing, a financing contingency is essential. The LOI should clearly state that closing is contingent on the buyer obtaining acceptable financing within a defined timeframe.
Why It Matters
The LOI sets the negotiating frame for the entire deal. Concessions made at LOI are extremely difficult to undo later. Conversely, terms not addressed at LOI often surface as expensive negotiations during diligence.
Educational content only — not advice. KQT Advisors, LLC is a commercial loan broker; we are not a lender, attorney, accountant, financial advisor, or fiduciary. We do not originate loans or make lending decisions. The information in this article is provided strictly for general informational and educational purposes and reflects our understanding at the time of writing. It is not — and must not be construed as — financial, tax, legal, accounting, investment, or any other professional advice, and creates no advisor-client relationship. Loan programs, rates, terms, eligibility requirements, fees, and approval criteria are set by individual lenders, the SBA, and other parties and are subject to change at any time without notice. Examples are illustrative only and not guarantees of outcome. Nothing here is a commitment to lend, an offer of credit, or a representation that any specific structure will be available to or appropriate for any borrower. Always consult your own qualified financial, tax, and legal advisors before acting on any information in this article. To the maximum extent permitted by law, KQT Advisors, LLC and its principals, employees, agents, and affiliates disclaim all liability for any direct, indirect, consequential, or incidental loss or damage arising out of any use of, reliance on, or inability to use the information in this article.