Submitting a Letter of Intent

Submitting a Letter of Intent

In our previous discussion of selling a business we took a moment to sit down with the seller and tour their operations. This discussion will take the process one step further to explain what happens when the buyer submits a letter of intent. A letter of intent (LOI) is a non-binding contract that formalizes the terms and conditions if the buyer were to purchase the business. The LOI pays special attention to the transaction structure including information on the purchase price and the length of due diligence.


The LOI is a great tool to ensure the buyer and seller are on the same page with the purchase terms and process. And while the LOI may be non-binding, the seller must accept the offer to move the transaction forward and the buyer will need to submit a good faith deposit to the broker’s transactional attorney.


Some of the terms and conditions you can expect to see in the LOI are as follows:

-The price the buyer is willing to pay for the business.

-How those funds will be received.

-The timeline of the transaction.

-Any training and transition requirements the buyer has for the seller.

-A non-compete agreement for the seller.

-And the length of the due diligence period.


Because this is a non-binding contract the buyer can back out of this agreement at any time and for any reason during the due diligence period. If the buyer chooses not to move forward with the business purchase, they will receive a full refund of their good faith deposit.


For more information on how Transworld - Rocky Mountain can support you with the business sale process, please visit our website or schedule a free consultation with one of our brokers today!


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Rachael Holstein joined the Transworld Team in 2016 as Marketing Coordinator. Her working experience has been largely focused on Business Development and Marketing in the finance, architecture, property management, and information technology industries. A long time resident of Cleveland, Ohio, she attained her Undergrad from John Carroll University and a Master’s Degree in Global Interactions from Cleveland State University. She relocated to Denver in 2013 for a change of scenery and a bit of adventure.


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