Letter of intent to buy a business: what to write in each clause, set by 48,800+ real listings

The short answer

Every figure here comes from the Main Street Index, BigIdeasDB’s census of 84,900+ businesses-for-sale listings from 29 marketplace sources in 115 countries, 78,500+ after removing cross-site duplicates. This guide reads the 48,800+ US listings quoted in dollars on an owner earnings (SDE) basis. SDE, seller’s discretionary earnings, is profit plus the owner’s pay and perks. Prices are asking prices and earnings are stated by sellers, never what a business sold for.

This is not legal advice. We explain what each term means and what listings disclose that should shape it. An attorney who handles small business acquisitions in your state should draft or review the letter you sign.

What is an LOI when purchasing a business?

An LOI is the buyer’s written offer, sent after reviewing the financials and before paying for full due diligence. It sits in the middle of the nine-step buying process, right after valuation and financing and before diligence and the purchase agreement. In small deals it runs two to five pages.

It does three jobs:

• Records the deal. Price, structure, what is included and the handover, so neither side spends two months working from a different number.
• Sets the process. How long diligence runs, what the closing depends on and when the offer expires.
• Creates a few real obligations. Usually confidentiality and exclusivity, which stop the seller from shopping your offer to other buyers.

The buyer prepares it. Brokers often hand you their template, which is written to protect the seller. Some SBA lenders ask to see the terms first so the structure fits their credit rules.

“I tell all borrowers I work with to run their LOIs by me first to make sure the terms are going to meet eligibility and bank credit policy.”r/buyingabusiness

Do not sign an LOI before you have seen the numbers. A broker who wants the letter and a deposit before sharing financials is asking you to commit blind. Buyers on forums report it often enough that it has its own threads. Remember whose agent the broker is: our business broker fees guide shows the seller pays the commission, typically 8% to 12% of the price under $1M.

“The broker is asking for an LOI and deposit before sharing the financials hoping that you psychologically commit.”r/buyingabusiness

Is a letter of intent legally binding?

Mostly no. The commercial terms (price, structure, closing date, training) are normally written as non-binding, while a short list of process terms is written to bind. Courts look at the whole document and at how the parties behaved, so a letter that just says “non-binding” at the bottom can still create obligations. Say plainly which paragraphs bind.

Can a seller back out of an LOI? Yes, on the purchase itself. What a seller cannot do during a binding exclusivity window is negotiate with other buyers. Can you back out? Also yes, if closing is conditional on financing, diligence and lease and licence transfers, which is why conditions matter more than any other clause for a buyer.

The risk of an LOI is not being trapped. It is anchoring. Once a price and structure are on paper, moving them costs credibility. One broker on Reddit says renegotiation still happens on about a third of deals even when they settle terms first.

“The goal is to work out all negotiations before the LOI so that we don’t need to afterward. About 1/3 of the time some renegotiation is still required.”r/buyingabusiness

Step 1: Do the pre-LOI work before you write a word

39.4% of US-dollar listings show a price with no earnings figure at all (our how to buy a business guide, Main Street Index), so your first job is getting numbers you can price from. Before the letter, you need three years of tax returns and P&Ls, a rebuilt SDE, a lender’s view of the structure and your own walk-away points.

• Rebuild SDE. Strip add-backs a new owner will still pay. Our small business valuation guide shows which add-backs survive.
• Call a lender. Confirm the loan size, the cash you must inject and whether a seller note must sit on standby. Our down payment guide works through the 10% rule.
• Pick your limits. Highest price, smallest seller note, shortest training you will accept and the conditions you will not drop.
• Read the listing for what it omits. An AI read of the listing is a fast way to build the question list.

“Decide your walk-away points before you send anything: max valuation, minimum seller note/transition support, training period, and key contingencies.”r/buyingabusiness

You do not need a full diligence file before the LOI, only enough to know the offer is real. Spending $10K or more on a quality of earnings review comes after the seller has agreed to a price range and a process.

Step 2: Set the price against the industry, not the ask

36.1% of 25,700+ US listings that can be compared with their industry ask at least 1.15 times the median multiple for their industry and price band, and 18.9% ask 1.5 times or more (Main Street Index deal metrics). If you write the asking price into your LOI, one listing in three starts you above the market for that business type.

Overpricing is an earnings problem, not a price problem. Listings well above their industry median ask $499K, only 19% more than in-line listings at $420K. But they state $100K of SDE against $180K, 44% less. The high multiple comes from thin earnings. That is why the price clause should name the SDE it rests on: if diligence confirms less, the price moves with it, and nobody calls it a retrade.

The gap is large. For listings 1.15x to 1.5x over their median, pricing at the median means offering a median 22.2% ($98.5K) below the ask. For listings 1.5x and over, it means a median 50.1% ($257K) below. Those are offers many sellers will refuse, and that is useful to know before you spend on lawyers.

Overpriced sellers bend on terms, not price. Seller financing is offered by 25.7% of listings well above their median against 20.6% of those well below, and recorded price cuts run the other way (9.3% against 16.3%). If you want an overpriced business, the LOI is where you trade a price closer to the ask for a larger seller note.

“Oof, no don’t submit at asking and expect to retrade. This almost never works.”r/buyingabusiness

“I would highly recommend offer exactly what you are willing to pay today based on the information you know at the current time.”r/buyingabusiness

To find your benchmark, look up the industry in the Main Street Index industry pages or paste the listing into the buyer view, which marks each listing as under, in line with or over its industry multiple. Our guide to what a business is worth has the same medians by revenue and price band. The 595 templated look-alike listings in the US set barely move this table: the share asking 1.15x or more is 36.4% with them removed.

Step 3: Write the payment structure the lender will accept

Only 20.4% of US listings offer seller financing (our seller financing guide, Main Street Index), so most LOIs combine an SBA 7(a) loan, your cash and, where you can get one, a seller note. Write each piece as a dollar figure, not a percentage of an unknown price.

• Your cash. SBA rules require an equity injection of at least 10% on a change of ownership, set out in the SBA’s SOP 50 10.
• SBA loan. The 7(a) program funds most of the rest; the lender, not the seller, decides the amount.
• Seller note. Rate, term, start date and whether it sits on full standby. A note on full standby can count for at most half of your 10% injection. Our seller financing guide has median note terms where listings state them.
• Holdback or earn-out. A holdback keeps part of the price back until a condition is met. Forum buyers report that SBA lenders will not finance earn-outs on these deals; ask your lender before you write one.

“Earnouts aren’t legally allowed under current SBA rules”r/buyingabusiness

Name the structure: asset purchase or stock purchase. Only 2.0% of listings say “asset sale” and 0.1% say “stock sale”. Most small deals are asset purchases, which let you depreciate equipment and leave the seller’s old liabilities behind. Both sides report how the price is split across asset classes on IRS Form 8594, so flag the allocation in the LOI rather than at the closing table.

Step 4: Pin down what the price includes

Only 32.4% of US listings state an inventory value (15,800+ listings), and 36.2% of those put the stock on top of the asking price rather than inside it (Main Street Index; among priced listings with stated SDE the share is 34.2%, as our hidden costs guide reports). Where stock is extra, the median is $25K, a median 6.9% on top of the ask, and for one in four of those listings (25.6%) it adds a quarter of the price or more.

Your LOI should say three things about stock: the normal level included in the price, that it is counted at closing, and that anything above that level is paid at cost while dead or unsellable stock is excluded. Whether stock is extra depends heavily on the industry.

In stock-heavy retail, inventory is a large slice of the deal: a median 52.6% of the ask in sporting goods retail (147 listings) and 40.2% in clothing retail (306). In gas stations, nearly every listing charges stock separately. If your target is in one of these trades, the inventory clause matters as much as the price.

“Inventory is usually trued up at close b/c otherwise you can bet just before closing that the bank account reads 0 and inventory is painfully low”r/buyingabusiness

Equipment is almost always included. 34.7% of US listings state a furniture, fixtures and equipment (FF&E) value, with a median of $80K or 21.4% of the ask, and 97.0% of those include it in the price. Attach an equipment schedule to the LOI so “included” means a list, not a promise.

Working capital is the gap nobody fills. Only 1.1% of US listing descriptions mention working capital and 0.7% mention receivables. Small deals usually leave cash and receivables with the seller, so you fund the first months yourself. Say it either way in the letter.

“I just had 7 LOIs on a recent business 5 had working capital assumptions and 2 explicitly said zero”r/buyingabusiness

“I always include language in my LOI to counter this and mention that the purchase price includes a normal level of working capital.”r/buyingabusiness

Step 5: Separate the real estate and the lease

24.0% of US listings that describe their premises say the property is owned (7,500+ of 31,500+), and where a property price is stated it is a median $995K (2,700+ listings). When the building is in the deal, it makes up a median 68% of the ask (1,500+ listings). Write the property as a separate purchase with its own price, appraisal and financing, or exclude it and require a lease.

Our valuation guide shows how property inflates the headline multiple. For the LOI, the practical point is simpler: a business multiple applied to a price that is two-thirds building overpays for the business.

For leased premises, the lease is a condition of closing. 75.8% of listings that describe premises are leased, yet only 1.7% of listings with buyer fields say whether the lease can be assigned. Make closing depend on the landlord assigning the lease, or signing a new one, for enough years to cover your loan. Our buying mistakes guide covers what a short lease does to a deal, and our guide to the commercial lease when buying a business measures rent against owner earnings by industry, from 6.9% of SDE in commercial cleaning to 77.1% in gyms.

Step 6: Write training and transition in weeks

Across 10,600+ US listings that state a training period, the median is 3 weeks, and 49.5% offer two weeks or less (Main Street Index). Exactly two weeks is the single most common offer (42.4%). Four weeks, 30 days or one month is next (29.3%). Three months or more is rare.

The finding that should change your LOI: the more the owner works, the less training they offer. Where the listing says the owner works under 20 hours a week, the median offer is 4 weeks (205 listings). Where the owner works 40 or more hours, it is 2 weeks (48 listings). The businesses that most depend on the seller come with the shortest handover.

Below $500K, the typical first-time buyer’s range, the median offer is 2 weeks in every band. It only reaches 4 weeks above $500K. By the owner’s stated role, owner-operated listings offer a median 2 weeks (1,800+ listings), the same as absentee ones (721), while manager-run businesses offer 4 (285). An owner-operated business is where you most need the seller, and where the listing offers least.

Write the clause in three parts:

• Full-time training in weeks, with the hours per week. If the owner works 40+ hours, ask for at least the 4 weeks that lighter-duty owners already offer.
• A paid consulting tail in months, by phone or on call, at a stated rate.
• A link to the money. Tie part of the seller note or a holdback to the handover, so the seller has a reason to keep showing up. Our guide to buying from a retiring owner covers sellers who plan to leave the area.

“My promise to a seller is that I won’t retrade - it doesn’t mean that I won’t walk away.”r/buyingabusiness

Step 7: Add the clauses listings never mention

Only 0.5% of 48,800+ US listings mention a non-compete anywhere in their description, training or financing text (our buying mistakes guide counts 0.2% on descriptions alone, across all markets), and 2% or fewer mention any one of working capital, receivables, deal structure, escrow, earn-outs or lease assignment (Main Street Index). These are terms the seller has not offered and will not raise. If they are not in your LOI, they arrive late, in the purchase agreement, when you have the least room to ask.

The non-compete matters most when the customers know the owner. 53.1% of the 15,300+ US-dollar listings that state the owner’s role are owner-operated (Main Street Index; our easiest business to run guide covers the hands-off minority), and an owner who opens across town takes those relationships along. Write the radius, the years and a ban on soliciting customers and staff.

Retirement is 40.6% of stated reasons for selling (our why owners sell guide), and retiring sellers rarely object to a non-compete. A seller who resists one is telling you something about their plans.

Step 8: Set exclusivity, diligence and conditions

Exclusivity in small business LOIs typically runs 30 to 90 days, according to the guides that rank for this search and the buyers on r/buyingabusiness. It must cover diligence and the SBA loan, which often takes weeks on its own. Start the clock when the seller delivers the documents, not when you sign, and allow one extension by agreement, never an automatic renewal.

• Diligence list. Attach it: three years of tax returns, monthly P&Ls, bank statements, the add-back schedule, payroll, the lease, the equipment list and customer concentration. Our guide to the disadvantages of buying shows how much of this listings leave out.
• Conditions. Financing approval, satisfactory diligence, lease assignment, licence and permit transfers, and a signed purchase agreement. Each one is a clean exit.
• Deposit. Only 25 US listings mention earnest money or a required deposit. If the seller asks for one, keep it small, held in escrow and refundable under every condition.
• Binding terms. List the paragraphs that bind and state that the rest do not.

“Most sellers find wordy LOIs and terms confusing.”r/buyingabusiness

Keep it short and plain. A two-page letter a seller understands beats a ten-page one they send to a lawyer who starts negotiating every line.

Sample letter of intent structure (not legal advice)

Below is a clause-by-clause outline of a buyer LOI for a small asset purchase, with sample wording and where each number should come from. It is an educational outline, not legal advice and not a form to sign. State law differs, and an attorney should draft or review the final letter.

A worked example. Say a listing asks $420K on $160K of stated SDE, and the industry-and-size median is 2.4x. Diligence-ready SDE of $160K at 2.4x is $384K. On an SBA deal with a 5% seller note on full standby, the split could read $19.2K buyer cash, $19.2K seller note and $345.6K SBA loan, plus closing costs and working capital you fund separately. The listing states $20K of inventory as extra, so the letter includes stock up to $20K at cost, counted at closing, and the seller offers two weeks of training, so you ask for four weeks full time plus three months by phone. Every figure is illustrative; your lender sets the real split.

What happens after the LOI is signed?

Due diligence and loan underwriting run at the same time, then your attorney drafts the purchase agreement, which replaces every non-binding term in the LOI. The LOI is the outline; the purchase agreement is the binding contract with representations, warranties, indemnities and closing mechanics. Our how to buy a business guide covers diligence and closing step by step.

Can you renegotiate? Yes, when diligence finds something new. When a seller’s numbers fail to verify, buyers on Reddit advise pointing to what the lender can underwrite rather than to your own opinion of the business.

“Frame it as “the financing won’t support the original number,” not “I’m lowering my offer.” Make the bank the bad guy.”r/buyingabusiness

That only works if your LOI named the SDE behind the price. It also works better if you kept other deals warm. One broker’s advice to buyers on the same forum:

“It is better to let a seller walk away from negotiations before the LOI than after.”r/buyingabusiness

For a structured check of what a listing claims against its industry, the due diligence help guide walks through the Main Street Index fields, and the guide to buying a business with the Main Street Index shows the buyer filters. If you work in Claude or ChatGPT, the Main Street Index MCP tools return the same comparisons in chat; set up the BigIdeasDB MCP or read how to use it with Claude.

Thinking of starting one instead?

An LOI is only needed if you buy. If the asking multiples in your industry look high next to what a new business would cost, compare both routes in our what business should I start guide and the start or buy by budget breakdown. If you are buying, the best businesses to buy ranking scores 118 industries on buyer fit.

What this data cannot tell you

• Asking, not agreed. Every price and multiple is what the seller asks. Signed LOIs and closed deals are not in the data, so we cannot tell you what terms buyers actually won.
• Stated, not verified. SDE, inventory and training come from the listing. Diligence often finds less.
• Silence is not refusal. A listing that does not mention a non-compete or working capital may agree to both. The table measures what sellers volunteer.
• Text matching is imperfect. Mentions are found by pattern match on descriptions, so some phrasings are missed and a few matches are generic.
• Small cells. The 40+ hour training median rests on 48 listings. It is directional, not precise.
• Templates. 595 US look-alike listings (same industry, SDE and revenue repeated 3+ times across 2+ states) were screened from the price comparison; they move it by 0.3 points.
• Not legal or tax advice. Nothing here replaces an attorney or CPA reviewing your deal.

Population. 48,800+ de-duplicated Main Street Index listings located in the US, quoted in US dollars on an SDE basis, captured from 29 sources in late September 2026 (49,900+ US-dollar listings worldwide). The price comparison uses the deal-metrics layer: 25,700+ US listings whose industry-and-price-band cell has enough listings for a median. Bands: under 0.6x, 0.6x to 0.85x, 0.85x to 1.15x, 1.15x to 1.5x and 1.5x or more of that median. Our valuation guides quote a 2.63x overall median on 27,500+ listings; this page compares each listing to its own industry instead.

Fields. Inventory, FF&E, real estate, training weeks and seller financing come from the listing record. Owner hours, owner role and lease assignment come from the buyer layer extracted from listing text. Silent-clause rates are pattern matches over the description, training and seller-financing text of all 48,800+ US listings, so they run slightly above description-only counts in our other guides. Medians throughout; cuts under 30 listings withheld; the smallest published cell is the 40+ hour training median (48 listings).

Field definitions for every number on this page are in the Main Street Index docs.

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