After weeks—or even months—of conversations, a buyer finally sends you a Letter of Intent (LOI).
It can feel like the finish line. In reality, it’s the starting line for the most important phase of your business sale.
At LevelStar, we help Colorado business owners navigate LOIs to maximize value and protect leverage—because a strong LOI often leads to a smooth, profitable closing.
What Exactly Is an LOI?
A Letter of Intent outlines the buyer’s proposed terms to purchase your business. This document sets the initial framework for the deal but is not a final contract. It typically includes:
- The offered purchase price
- How and when the buyer intends to pay
- What the buyer expects you to leave in the business (like cash or working capital)
- A proposed timeline for due diligence and closing
- Exclusivity terms (whether you can talk to other buyers)
- Other major conditions (financing approval, landlord consents, etc.)
Key point: While an LOI itself is mostly non-binding, certain sections—especially exclusivity—are legally enforceable once signed.
What to Expect Inside a Letter of Intent
| Section | Why It Matters |
|---|---|
| Purchase Price | Total price offered (gross, before taxes/fees) |
| Deal Structure | How the buyer will pay—cash, seller note, earn-out, etc. |
| Working Capital Terms | How much cash or inventory stays in the business |
| Due Diligence Period | Timeframe for buyer review (typically 30–90 days) |
| Exclusivity Clause | You agree not to shop the deal while buyer investigates |
| Contingencies | Loan approval, lease transfers, licenses, and more |
| Post-Sale Transition | How long you stay to support handoff |
What’s Negotiable (Hint: Almost Everything)
- Adjusting purchase price based on working capital or growth trends
- Structuring cash vs. seller financing at close
- Exclusivity length—shorter is often better for sellers
- What’s counted in working capital (negotiating this protects cash)
- Clarifying transition roles and whether they’re paid
Remember: The LOI shapes the path forward. Clarify and protect your terms now, not later.
How Long Does the LOI Process Take?
Every deal is different. The timeframes below are typical—but should be viewed as general estimates, not guarantees.
| Phase | Typical Timeframe | Your Focus |
|---|---|---|
| LOI Negotiation | 1–3 weeks | Finalize key deal points |
| Due Diligence | 30–90 days | Provide clean, organized data |
| Legal & Financing Finalization | 30–45 days | Work with attorneys and lenders |
| Closing & Transition | 1–2 weeks | Hand over the reins, start next chapter |
Small-business deals can vary in pace, and SBA-financed transactions often take longer due to lender timelines and approvals—making organization and preparedness even more critical.
Common Seller Pitfalls to Avoid
- Accepting a long exclusivity period without progress requirements
- Ignoring working capital definitions (leading to cash shortfalls at closing)
- Overlooking tax impact based on asset vs. stock sale structures
- Signing an LOI without legal review—small wording choices can shift big dollars later
We help you avoid these pitfalls so you can focus on what matters: maximizing value and closing with confidence.
How LevelStar Protects Your Interests at the LOI Stage
- Benchmark offers against comparable small-business transactions
- Negotiate fair exclusivity terms and timelines
- Model potential proceeds under different deal structures
- Coordinate CPAs and attorneys early to avoid costly surprises
- Keep backup buyers warm when appropriate—because leverage matters
“The best LOIs leave sellers positioned to close quickly, confidently, and at full value—not scrambling to renegotiate later.”
Before You Sign an LOI, Ask Yourself:
- Does this offer align with my financial and personal goals?
- Are the structure and cash-at-close terms acceptable?
- Am I fully clear on transition expectations after closing?
- Have my CPA and attorney reviewed the LOI before I commit?