{"id":43459,"date":"2022-12-22T09:30:00","date_gmt":"2022-12-22T09:30:00","guid":{"rendered":"https:\/\/swoopfunding.com\/za\/blog\/how-to-write-letter-of-intent-loi\/"},"modified":"2025-03-17T13:06:31","modified_gmt":"2025-03-17T13:06:31","slug":"how-to-write-letter-of-intent-loi","status":"publish","type":"blog","link":"https:\/\/swoopfunding.com\/za\/acquire-a-business\/how-to-write-letter-of-intent-loi\/","title":{"rendered":"How to write a letter of intent (LOI) for business acquisition"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"43459\" class=\"elementor elementor-43459\" data-elementor-post-type=\"blog\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-37299c8e elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"37299c8e\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-5a0445da\" data-id=\"5a0445da\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-eed9fbd elementor-widget elementor-widget-ucaddon_aivoov_player\" data-id=\"eed9fbd\" data-element_type=\"widget\" data-widget_type=\"ucaddon_aivoov_player.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\n\n\t\t\t<div class=\"aivoov-player-block\">\n\t<div class=\"read_this\">Read this article to me<\/div>\n\t\t\t<style>\n\t\t\t.plyr__controls .plyr__controls__item:first-child{\n\t\t\t\tbackground:#2e9c8e !important;\n\t\t\t}\n\t\t\t:root{\n\t\t\t--plyr-color-main:#2e9c8e;\n\t\t\t--plyr-audio-controls-background:#f0f2f4;\n\t\t\t--plyr-audio-control-color:#546a7b;\n\t\t\t}\n\t\t\t[data-plyr=\"mute\"]{color:#2e9c8e !important}\n\t\t\t.aivoov-text-color{color:#546a7b}\n\t\t<\/style> \n\t\t<div class=\"audio_player\">\n\t\t<audio class=\"js-player\" controls=\"\">\n\t\t\t<source src=\"https:\/\/monky-voice-over.s3.amazonaws.com\/aivoov\/781640cc-7bc1-4bbf-9492-22dedc19678b\/fd074cfd-d8ce-40d9-9d40-00ae544ef08b.mp3\" type=\"audio\/mp3\">\n\t\t\t<source src=\"https:\/\/monky-voice-over.s3.amazonaws.com\/aivoov\/781640cc-7bc1-4bbf-9492-22dedc19678b\/fd074cfd-d8ce-40d9-9d40-00ae544ef08b.mp3\" type=\"audio\/ogg\" \/>\n\t\t<\/audio> \n\t\t\t\t <div class=\"powerd_by aivoov-text-color\"><p><a rel=\"nofollow noopener\" target=\"_blank\" href=\"http:\/\/aivoov.com\/?um_source=plugin_powered_by\" style=\"color: inherit;\">Powered by AiVOOV<\/a><\/p><\/div>\n\t\t \n\t\t<\/div>\n\t\t<\/div>\n\n\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-5982b20a elementor-widget elementor-widget-text-editor\" data-id=\"5982b20a\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p><span style=\"font-weight: 400;\">Once you\u2019ve set your objectives for buying a business, done your initial research and identified what looks like a good acquisition target, it\u2019s time to let the seller know that you\u2019re officially interested. This makes it possible to deepen your research and move the project forward. The tool you use at this point is a letter of intent \u2014 which is often referred to as an LOI.<\/span><\/p><h2><b>What is a letter of intent?<\/b><\/h2><p><span style=\"font-weight: 400;\">A letter of intent is a letter from you to the seller of the business that lets them know that you are seriously considering submitting a formal bid to purchase the business, and that lays out the proposed transaction details at a high level. Although it is not a legally binding agreement to purchase, it may include elements that create binding obligations between the potential buyer and seller, including:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Confidentiality agreement.<\/b><span style=\"font-weight: 400;\"> This lets the seller know that they can safely disclose key information about the business to you, such as their financial records, client lists, and intellectual property, and that you will keep it confidential. This allows you to examine the business much more closely and puts the seller\u2019s mind at ease.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Exclusivity period. <\/b><span style=\"font-weight: 400;\">This sets out a period of time during which the seller agrees not to entertain offers from any other buyers without speaking to you first. This gives you the time you need to do your <a href=\"https:\/\/swoopfunding.com\/us\/business-glossary\/due-dilligence\/\">due diligence<\/a> and protects your option to buy if you so choose. There may be financial penalties for the seller if they sell the business to someone else without consulting you during the exclusivity period.\u00a0<\/span><\/li><\/ul><h2><b>Why is a letter of intent for business important?<\/b><\/h2><p><span style=\"font-weight: 400;\">A letter of intent, or LOI, is important for a business because it signals the beginning of due diligence and negotiations that are necessary to complete a business acquisition. It does not have to be a lengthy document and there is generally no standard format for an LOI. When it comes time to draft one, you will likely want the assistance of a lawyer who is experienced with such matters in order to ensure that it covers the right bases. It can protect you from exposure to any unintended consequences, especially if the deal doesn\u2019t work out.<\/span><\/p><h2><b>When to use a letter of intent<\/b><\/h2><p><span style=\"font-weight: 400;\">A letter of intent typically comes in after you\u2019ve had your initial conversations with the seller of the business and done enough homework that you now intend to purchase the business, barring any negative surprises. The letter of intent lets the seller know that you are serious and acts as the opening salvo in a process that will involve further research and negotiation around price and other factors.<\/span><\/p><h2>What should a letter of intent include?<\/h2><p>A letter of intent typically includes several key elements that outline the intentions of the parties involved in a business transaction or negotiation. These elements may vary, but commonly include:<\/p><ul><li><strong>Introduction<\/strong>: The letter begins with a brief introduction that identifies the parties involved and provides context for the purpose of the letter.<\/li><li><strong>Statement of intent<\/strong>: The main part of the letter outlines the intention, including the terms and conditions of the agreement or transaction.<\/li><li><strong>Description of the transaction<\/strong>: The letter include details about the transaction, such as the type of business deal being considered and any relevant background information.<\/li><li><strong>Terms and conditions<\/strong>: The letter outline the terms and conditions of the agreement, including key parts such as price, payment terms, and timeline.<\/li><li><strong>Confidentiality<\/strong>: The letter include a part to protect the confidentiality of the negotiations and any sensitive information shared between the parties.<\/li><li><strong>Exclusivity<\/strong>: In some cases, the letter also include a part granting one party exclusivity.<\/li><li><strong>Due diligence<\/strong>: The letter outline the process for conducting due diligence, including access to information and any deadlines for completing the due diligence process.<\/li><li><strong>Termination clause<\/strong>: The letter include the circumstances under which the letter of intent may be terminated by either party and the consequences of termination.<\/li><li><strong>Governing law<\/strong>: The letter specify the governing law that will apply to the agreement.<\/li><li><strong>Signature<\/strong>: The letter ends with the signatures of the parties, indicating their agreement to the terms outlined in the letter.<\/li><\/ul><h2><b>How to write a letter of intent for business<\/b><\/h2><p><span style=\"font-weight: 400;\">Remember your objectives when you write an LOI. Stick to the big idea and don\u2019t try to be too precise or get bogged down in details. In fact, adding certain details like specific dates and dollar amounts can be risky, as they could make the document legally binding.\u00a0<\/span><\/p><p><span style=\"font-weight: 400;\">It\u2019s often advised to hire a lawyer to write an LOI, but if you decide to do it yourself, you can follow this format:\u00a0<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Introduction.<\/b><span style=\"font-weight: 400;\"> State the purpose of the document, your name, the seller\u2019s name and describe the transaction \u2014 who intends to buy what from who.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Potential transaction. <\/b><span style=\"font-weight: 400;\">Here you can be more specific about an approximate price or price range that you are proposing, as well as rough timelines for the next steps.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Contingencies. <\/b><span style=\"font-weight: 400;\">This is where you can spell out the conditions that will be necessary to make a deal. For example, you might need to be fully satisfied by the due diligence process or be successful in securing funding.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Due diligence.<\/b><span style=\"font-weight: 400;\"> Here you can go into detail about some of your due diligence expectations, such as the types of financial, customer, employee and other data that you will need to review as part of your decision-making process.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Covenants and binding agreements. <\/b><span style=\"font-weight: 400;\">This is where you can add legally binding aspects to the LOI, such as a nondisclosure agreement or a non-compete agreement. These ensure that the buyer may not use the seller&#8217;s information to start a competing business.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Non-binding agreement. <\/b><span style=\"font-weight: 400;\">Just to be super clear and avoid any misunderstanding, the LOI should specifically state that the agreement is non binding. It is not a firm offer to purchase the business.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Closing date.<\/b><span style=\"font-weight: 400;\"> This sets out a time limit for the due diligence and negotiation process. If the deal has not been closed by this date, the LOI expires, and both parties can move on.<\/span><\/li><\/ul><h2><b>Key considerations for writing a letter of intent for business<\/b><\/h2><p><span style=\"font-weight: 400;\">A few helpful guidelines:<\/span><\/p><ul><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Be accurate.<\/b><span style=\"font-weight: 400;\"> An LOI sets the tone for the negotiation with the seller, it might be required to secure your funding, and although it may not be legally binding, the seller always has the right to take it to court if something goes wrong. Take time to double-check all the names, dates, and amounts.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Keep it simple. <\/b><span style=\"font-weight: 400;\">There\u2019s no need to say more than what\u2019s required to get to the next step. The more details or complex language you add, the more likely there will be a misunderstanding. Keep it short and sweet.<\/span><\/li><li style=\"font-weight: 400;\" aria-level=\"1\"><b>Consider a lawyer. <\/b><span style=\"font-weight: 400;\">If the transaction is very straightforward or for a relatively minor amount, feel free to draft your own LOI. But if there is a hint of doubt or you prefer to err on the side of caution, a lawyer with experience in LOIs can be invaluable.<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t<div class=\"elementor-element elementor-element-d472d55 e-flex e-con-boxed e-con e-parent\" data-id=\"d472d55\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t<div class=\"elementor-element elementor-element-b9d7bb7 e-con-full e-flex e-con e-child\" data-id=\"b9d7bb7\" data-element_type=\"container\">\n\t\t\t\t<div class=\"elementor-element elementor-element-f5bef82 elementor-align-center elementor-widget elementor-widget-button\" data-id=\"f5bef82\" data-element_type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-sm\" href=\"https:\/\/southafrica.swoopfunding.com\/get-started?fundingReason=acquireaBusiness\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t\t\t\t<span class=\"elementor-button-text\">Get started<\/span>\n\t\t\t\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-224be6e e-flex e-con-boxed e-con e-parent\" data-id=\"224be6e\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t<div class=\"elementor-element elementor-element-7ce0237 e-flex e-con-boxed e-con e-child\" data-id=\"7ce0237\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-66968c3 elementor-widget elementor-widget-text-editor\" data-id=\"66968c3\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<h2><b>Example letter of intent<\/b><\/h2><p>To assist you in drafting your LOI, here&#8217;s a template that outlines the general points you may want to include in your letter. As an LOI is often written by the buyer, we provide such a template:<\/p><p>&#8220;[Your name and position, your company name, your address]<\/p><p>Dear [Seller&#8217;s name],<\/p><p>This letter of intent concerns the interests of the following parties:<\/p><p>Buyer: [Your name]<\/p><p>and<\/p><p>Seller: [Seller\u2019s name]<\/p><p>In which Buyer would purchase the business assets set forth in this letter from\u00a0Seller. Following are terms, conditions and steps to move towards an agreement.<\/p><ol><li><strong>Potential transaction<\/strong><\/li><\/ol><p>The potential transaction would involve payment of [amount] from [Buyer] to [Seller] in exchange for [the specific business assets].<\/p><ol start=\"2\"><li><strong>Contingencies<\/strong><\/li><\/ol><p>Before the parties can reach a final agreement, [Buyer] must conduct due diligence and be satisfied with all information and documents that [Seller] provides.<\/p><ol start=\"3\"><li><strong>Due diligence<\/strong><\/li><\/ol><p>[Buyer] asks permission to examine the financial, accounting and business records, contracts and other legal documents of [Seller] until the closing, or termination, of this Letter of Intent.<\/p><ol start=\"4\"><li><strong>Confidentiality agreement<\/strong><\/li><\/ol><p>All information that [Buyer] and [Seller] share will remain strictly confidential between the parties and their legal representation.<\/p><ol start=\"5\"><li><strong>Expenses<\/strong><\/li><\/ol><p>All parties agree to carry their own expenses, including any legal or professional fees that may result from due diligence proceedings or any other matter associated with the intended transaction.<\/p><ol start=\"6\"><li><strong>Nonbinding agreement<\/strong><\/li><\/ol><p>Except for the section entitled &#8220;Confidentiality agreement,&#8221; this Letter of Intent is nonbinding for both parties.<\/p><ol start=\"7\"><li><strong>Closing date<\/strong><\/li><\/ol><p>The closing of the transaction should occur no later than [date]. In the event of the parties not concluding the transaction, the &#8220;Confidentiality Agreement&#8221; clause still stands, as does any other Confidentiality Agreement that may be in place.<\/p><p>Sincerely,<\/p><p>Agreed to by Buyer<\/p><p>[Buyer signature and date]<\/p><p>Accepted and Agreed by Seller(s)<\/p><p>[Seller signature and date]&#8221;<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Once you\u2019ve set your objectives for buying a business, done your initial research and identified what looks like a good acquisition target, it\u2019s time to let the seller know that you\u2019re officially interested. This makes it possible to deepen your research and move the project forward. The tool you use at this point is a [&hellip;]<\/p>\n","protected":false},"author":29,"featured_media":43522,"comment_status":"closed","ping_status":"closed","template":"","category":[59,368],"class_list":["post-43459","blog","type-blog","status-publish","has-post-thumbnail","hentry","category-blog","category-business-acquisition"],"acf":[],"featured_image_urls_v2":{"full":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled.jpg",2560,1702,false],"thumbnail":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-150x150.jpg",150,150,true],"medium":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-300x199.jpg",300,199,true],"medium_large":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-768x511.jpg",768,511,true],"large":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-1024x681.jpg",1024,681,true],"1536x1536":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-1536x1021.jpg",1536,1021,true],"2048x2048":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-2048x1362.jpg",2048,1362,true],"image_blog":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-408x252.jpg",408,252,true],"image_podcast":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-397x298.jpg",397,298,true],"image_banking":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-30x20.jpg",30,20,true],"image_blog_internal":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-840x480.jpg",840,480,true],"image_blog_medium":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-1024x500.jpg",1024,500,true],"image_single_banking":["https:\/\/swoopfunding.com\/za\/wp-content\/uploads\/sites\/7\/2025\/03\/letter-of-intent-featured-scaled-80x53.jpg",80,53,true]},"post_excerpt_stackable_v2":"<p>Once you\u2019ve set your objectives for buying a business, done your initial research and identified what looks like a good acquisition target, it\u2019s time to let the seller know that you\u2019re officially interested. This makes it possible to deepen your research and move the project forward. The tool you use at this point is a letter of intent \u2014 which is often referred to as an LOI.What is a letter of intent?A letter of intent is a letter from you to the seller of the business that lets them know that you are seriously considering submitting a formal bid to&hellip;<\/p>\n","category_list_v2":"<a href=\"https:\/\/swoopfunding.com\/za\/category\/blog\/\" rel=\"category tag\">Blog<\/a>, <a href=\"https:\/\/swoopfunding.com\/za\/category\/business-acquisition\/\" rel=\"category tag\">Business acquisition<\/a>","author_info_v2":{"name":"Michael David","url":"https:\/\/swoopfunding.com\/za\/author\/michael-david\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog\/43459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog"}],"about":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/types\/blog"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/users\/29"}],"replies":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/comments?post=43459"}],"version-history":[{"count":5,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog\/43459\/revisions"}],"predecessor-version":[{"id":43523,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/blog\/43459\/revisions\/43523"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/media\/43522"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/media?parent=43459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swoopfunding.com\/za\/wp-json\/wp\/v2\/category?post=43459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}