Template Tuesday: Universal Letter of Intent for Purchases

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1. Feature: Template Tuesday: Universal Letter of Intent for Purchases (4 min)

2. From the Archive: Need an Attorney for your Business? A Guide to Selecting Carefully (Read it here)

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Every business owner buys something big sooner or later. A building. A major piece of equipment. A route. A competitor’s book of business. The Letter of Intent (LOI) is how you slow the process down, learn what you need to learn, and protect yourself while you decide whether to commit. It is the speed bump before a binding purchase contract. It is also the reason you want your own form.

We can’t prepare an LOI that fits every asset. Deal types vary. The goal today is practical. We will walk through what a solid, universal LOI should say and what to watch for when a bad one crosses your desk. You will see language from our working template, which you can adapt to real estate, equipment, or a business acquisition.

Start with non-binding clarity

A good LOI tells everyone what it is and what it is not. Your opening should make the LOI’s non-binding nature plain. The template begins: “The following outlines the terms of a non-binding LOI between the parties identified below.” 

Later it reinforces the point: “No obligation shall exist unless and until a definitive PSA is executed, except for the following binding provisions: Confidentiality, Brokerage, Exclusivity (if elected), and Governing Law.” That sentence sets the guardrails and prevents accidental contracts. Use it.

Identify the deal in neutral terms

Keep the subject broad so the same LOI works for land, machines, or an operating business. The template uses neutral language: “The subject of this transaction (the ‘Asset’) is described as: Asset(s): [Real estate, equipment, machinery, business, or other asset(s) to be acquired].” This avoids rework later.

State the price and leave room for adjustments

Price belongs up front, with clear room for closing adjustments and credits later. The template puts it this way: “The proposed purchase price shall be $[Amount], payable in U.S. Dollars at closing, subject to adjustments, prorations, and credits as agreed in the definitive Purchase and Sale Agreement.” Simple and clean.

Control the timeline

Two dates matter. The date you sign the LOI and the date you sign the purchase agreement. Your LOI should set a brisk but realistic cadence. The template says the parties “shall negotiate and execute a definitive Purchase and Sale Agreement” within a set number of business days after the LOI date. Put in a number you will meet. It focuses on both sides.

Handle money with care

If you use a deposit at the LOI stage, protect it. The template calls for a “good faith deposit” with clear treatment: “Applied to the Purchase Price at closing. Refundable to Buyer if the transaction does not close due to disapproval during Due Diligence or as otherwise provided in the PSA. Non-refundable once Buyer approves Due Diligence, except as otherwise expressly provided.” This sequence is sensible. Refundable first, then only goes hard after an affirmative approval. 

A bad LOI flips that order or uses vague triggers. If you see language that makes the deposit nonrefundable on signing or on receipt of some information, push back.

Make due diligence a defined period, not a handshake

Your LOI should reserve access to what you need and set a real exit if the facts disappoint. The template gives the buyer “[XX] days from the Date of Agreement” for due diligence, plus explicit access to documents and physical assets where applicable. It also gives a clear out: “If Buyer disapproves of the results of Due Diligence, Buyer may terminate this LOI by written notice prior to expiration of the Due Diligence Period, and the Deposit shall be returned.” That is the safety valve you want. 

A bad LOI uses open ended phrases. Watch for language like reasonable time or commercially reasonable efforts without dates. That vagueness will cut against you when the other side grows impatient.

Add an exclusivity decision in writing

This is where deals either stay on track or go sideways. Your LOI must say whether the seller will take the asset off the market. The template gives you a clear choice.

“Option A – Exclusive: Seller agrees that, from the Date of Agreement until the earlier of termination of this LOI, or execution of a definitive PSA, Seller shall not solicit, encourage, or negotiate with any third party regarding the sale, lease, transfer, or financing of the Asset.” 

“Option B – Non-Exclusive: The parties acknowledge that this LOI is non-exclusive. Seller shall remain free to market, solicit, or negotiate with other potential buyers during the term of this LOI unless and until a definitive PSA is executed.” 

Pick one. Make it obvious. Nothing sours momentum like learning the seller is shopping your offer while you spend real time and money on due diligence.

Lock down the closing path

After diligence, a good LOI says when you will close and permits mutual extensions. The template does this in a single sentence and saves the mechanics for the PSA. That is the right split. Use the LOI to set expectations. Use the PSA to set rules.

Include the quiet essentials

Three workhorses carry over from deal to deal.

Confidentiality. The template says both sides must keep the terms and talks confidential, with narrow exceptions for law and advisors. That protects your pricing and structure while you evaluate.

Assignment. Keep the right to assign to a related entity or affiliate. That lets you form a new LLC for the asset without renegotiation. 

Brokerage. State who pays a commission, if anyone, and add mutual indemnities for other claims. You do not want surprise broker demands at or after closing.

Use an LOI to avoid premature PSAs

Owners sometimes rush to a full PSA because a seller pushes for it, or a broker sends over a form. Resist. The LOI is your tool to slow down, set the outline, and look under the hood before you bind yourself. The template’s structure supports that rhythm. It gives you a defined diligence window, a refundable deposit until you approve, and a choice on exclusivity. That combination lets you test the deal with discipline.

Red flags in a bad LOI

No non-binding statement in the opening.
Deposit becomes nonrefundable on day one.
Due diligence without a set number of days.
No clear exclusivity election.
No confidentiality clause.
No assignment right.
Brokerage left blank or left to be decided.
An LOI that pushes you into representations, warranties, and indemnities better suited for the PSA.

Final notes

Language matters but so does fit. Our template is suggested language only and should be reviewed by a licensed attorney. Some states may require different language. Treat it as a strong starting point and pair it with sound judgment. 

A good LOI works across asset types because it does first principles well. It tells the truth about intent. It sets timelines. It manages money. It defines diligence. It makes the exclusivity decision explicit. It keeps you from jumping into a PSA when you do not need to.

That is how you buy right.

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