What Does a Letter of Intent Actually Mean?

If a buyer tells you they want to submit a Letter of Intent, that's a good sign. The process has moved from "we're interested" to "here's what we're actually proposing."

But an LOI isn't a done deal. Here's what it actually is.

An LOI Is a Framework, Not a Contract

The Letter of Intent lays out the key terms of a proposed transaction: price, structure, timing, and major conditions. It's non-binding — neither party is legally committed to close.

Think of it as a handshake on the broad strokes. You're both agreeing to work toward a deal on these general terms while the detailed documentation gets built.

What an LOI Typically Covers

• The proposed purchase price or range
• Transaction structure — asset sale vs. stock sale
• The due diligence period and timeline
• An exclusivity clause — typically 30–60 days where you agree not to talk to other buyers
• Seller financing or other structure provisions
• A target closing date

What It Doesn't Cover

The full purchase agreement, representations and warranties, indemnification provisions, and the rest of the legal detail. All of that comes after diligence.

Signing an LOI commits you to work toward a deal in good faith. It doesn't commit you to close.

Should an Attorney Review It?

Yes. Even though an LOI is non-binding, the terms it sets create real momentum — practically speaking, it's hard to meaningfully renegotiate after both parties have signed.

Pay particular attention to the exclusivity clause. It's the provision that stops you from running a parallel process, which is leverage you give up the moment you sign. Make sure the window is reasonable and the buyer has shown enough substance to deserve it.

Price vs. Proceeds

One thing worth understanding before you sign: the number in an LOI is the purchase price. Your actual net proceeds depend on transaction structure, taxes (capital gains vs. ordinary income), broker commissions, attorney fees, and any working capital adjustments at close.

The gap between those two numbers surprises a lot of first-time sellers. Map it with your accountant before you sign, not after. (And if your buyer is using SBA financing, the structure of their offer affects your timeline too.)

Curious what an LOI from Stonecrest looks like before you'd ever see one? We'll walk you through it — every conversation is confidential.