What to Do After Signing a Letter of Intent (LOI) to Buy or Sell a Business

Short answer: After the letter of intent is signed, the deal enters its most intensive phase: due diligence, financing, and the definitive purchase agreement. The LOI is mostly non-binding on price but binding on exclusivity, so the clock is running. Deals that die usually die here, and preparation is what keeps yours alive.

You’ve found the right business. You’ve negotiated the deal. And now you’ve both signed a Letter of Intent. It’s an exciting moment, but it’s also just the beginning of the most intensive phase of the transaction. Here’s what happens next and how to navigate it successfully.

What Is a Letter of Intent?

A Letter of Intent, or LOI, is a non-binding document that outlines the key terms of a proposed business acquisition: the purchase price, the deal structure (asset sale vs. stock sale), what’s included in the sale, proposed financing terms, and the timeline for due diligence and closing.

It’s non-binding, which means neither party is legally committed to completing the deal. However, most LOIs include a binding exclusivity clause, which means the seller agrees not to market the business or negotiate with other buyers during the due diligence period. That gives the buyer protected time to verify everything before committing.

What a Letter of Intent Should Cover

A useful LOI runs a few pages and settles the questions that would otherwise blow up the deal later. Before you sign, make sure it spells out:

• How the price is paid: cash at closing, any seller note, any earnout, and any amount held in escrow.
• What is included: equipment, vehicles, inventory, receivables, the business name, phone numbers, and website, and anything the seller keeps.
• Inventory and working capital: whether a set level is included in the price or counted and adjusted at closing. Here is how working capital affects a sale.
• Contingencies with deadlines: financing, lease assignment, license transfers, and due diligence, each with a date.
• Exclusivity: how long the business comes off the market, and what ends it early.
• Deposit: how much, who holds it, and when it becomes nonrefundable.
• The seller’s role after closing: transition length, pay, and the scope of any non-compete.
• Which sections are binding: usually exclusivity, confidentiality, and who pays their own costs.

Vague wording is where trouble starts. A price “including inventory” means something very different from a price “plus inventory at cost, counted at closing.” If a term matters to you, put it in the letter now, while other buyers are still interested.

The letter also shows you how the buyer will behave. A clear, reasonable LOI from a buyer who has studied your numbers is a good sign. A low price wrapped in long exclusivity and loose contingencies usually means the buyer wants an option, not a deal.

Not every sale uses one. Some sellers and brokers skip the LOI and go straight to a purchase agreement with contingencies, and that is how I usually work, because it puts the real deadlines in a binding document from day one. Either way, have your attorney review it before you sign, and make the non-binding language explicit so no one can later argue the letter was a contract.

Step 1: Engage Your Professional Team

If you haven’t already, now is the time to get your full team in place. That typically means:

• A transaction attorney to review and draft the Purchase Agreement and all ancillary documents
• A CPA to help review financial records and advise on tax implications of the deal structure
• Your lender (if using SBA financing) to start the formal loan application process

For sellers, your business broker and attorney take on heavier roles during this phase. For buyers, you’ll be driving much of the activity.

Step 2: Begin Due Diligence

Due diligence is the buyer’s opportunity to verify that everything represented about the business is accurate. This is a critical phase and shouldn’t be rushed: it’s your protection against buying something with hidden problems.

The seller should be prepared to provide documentation quickly and transparently. Delays or evasiveness during due diligence are major red flags. Organized sellers who have their documents ready move through due diligence much faster; disorganized sellers drag it out, or lose the deal entirely.

Key areas of due diligence typically include: financials, legal standing, operations, lease review, employee review, and equipment/asset verification.

Step 3: Complete the SBA Loan Application (If Applicable)

If the buyer is using SBA financing, the lender will need a significant amount of documentation from both the buyer and the seller. On many acquisitions the lender will also order an independent business valuation, and it will do its own underwriting review.

Source: U.S. Small Business Administration, including its 7(a) loan program page and its SOP 50 10 lending rules. SBA rules change, so verify current requirements with the SBA or an SBA lender before relying on them.

SBA underwriting takes weeks, not days. The sooner you start, the better, so don’t wait until due diligence is complete to engage your lender.

Step 4: Negotiate the Purchase Agreement

While due diligence is ongoing, attorneys on both sides will begin drafting and negotiating the formal Purchase Agreement. This is a much more detailed document than the LOI and will govern every aspect of the transaction: representations and warranties, indemnification provisions, non-compete agreements, the transition plan, and more.

Expect some back and forth. Good attorneys on both sides protect their clients without being unnecessarily difficult. The goal is to get to a signed agreement that everyone can live with.

Step 5: Address Any Issues That Come Up

Due diligence almost always turns up something unexpected: maybe it’s a lease clause that needs to be negotiated with the landlord, a discrepancy in the financials, or an undisclosed liability. How these issues are handled often determines whether the deal closes.

Stay focused on solving problems rather than assigning blame. Deals that close are deals where both sides keep their eyes on the finish line.

Step 6: Close the Deal

Once due diligence is complete, financing is approved, and the Purchase Agreement is signed, you’re ready to close. Funds are transferred (usually via wire), final documents are signed, and ownership officially changes hands. A transition period follows, during which the seller helps the buyer learn the business.

Watch the Exclusivity Clock

Most LOIs take the business off the market for a defined exclusivity period while the buyer investigates. That protection is reasonable, but it is also leverage: a seller who lets diligence drift is spending their negotiating position a week at a time. Agree on a timeline with milestones (document requests, financing application, appraisal) and hold both sides to it. If the buyer is using an SBA 7(a) loan, the lender’s underwriting drives much of the schedule, so get that application moving immediately.

This is also when due diligence either rewards your preparation or repricing begins. The sellers who sail through are the ones whose books already reconcile and whose documents are already organized. Everything the buyer verifies cleanly builds momentum toward the purchase agreement; everything they cannot verify becomes a renegotiation.

Frequently Asked Questions

Is a letter of intent binding?

Mostly no on the business terms (price and structure remain subject to diligence and the purchase agreement), but typically yes on exclusivity and confidentiality. Read it before signing, because taking your business off the market has real cost.

How long does it take to close after the LOI?

It depends on preparation and financing. Well-prepared deals with a qualified buyer can move to closing in a couple of months; diligence surprises and slow lender files stretch it. The milestones you set in the LOI period matter more than the calendar.

Can a buyer change the price after the LOI?

They can propose to, usually citing something found in diligence. Clean, verifiable financials are your best defense, because repricing needs a justification, and preparation removes the justifications.

What kills deals between LOI and closing?

More often process and emotion than economics: drift, surprises that should have been disclosed earlier, financing that started late, and trust eroding between the parties. Momentum and transparency are the antidotes. See the full selling process for where this phase fits.

What should a letter of intent include?

At minimum: the price and how it is paid, what is included, asset or stock structure, how inventory and working capital are handled, contingencies with deadlines, the exclusivity period, any deposit, the seller’s transition role, and which sections are binding. The more specific it is, the fewer surprises in the purchase agreement.

How long should LOI exclusivity last?

Long enough for the buyer to finish due diligence and line up financing on a realistic schedule, and no longer. Tie it to milestones, such as a submitted loan application by a set date, and let it end automatically if the buyer misses them.

Do I have to sign a letter of intent before a purchase agreement?

No. Some sellers and brokers skip the LOI and go straight to a purchase agreement with contingencies, which is how I usually work. It puts binding deadlines in place from the start and removes a round of drafting.

Navigating the Process

The phase after signing the LOI can feel overwhelming, especially if it’s your first time buying or selling a business. Having experienced guidance makes all the difference. Use my free valuation calculator to understand business value, or reach out for a free consultation to discuss where you are in the process and what comes next.

The letter of intent is one milestone. See the whole path in how to sell a business in Florida.

• Category: Selling a Business