Letter of Intent to Buy a Business: LOI Template (2026)

A letter of intent to buy a business is a short, mostly non-binding document that states the price, the structure and the timeline before anyone spends real money on diligence. The binding parts are usually exclusivity and confidentiality. The rest is a written handshake, and how tightly you write it decides whether the deal survives diligence or gets re-traded.

I have reviewed 50+ deals as a buyer, and I send a non-binding LOI within two weeks of discussing potential deal structures with the seller. Most LOI templates online are generic M&A boilerplate: download one, add a price, send it. That leaves the terms that get argued over in diligence vague, and vague is where deals die. Here are the seven terms that matter, then paste-ready clauses.

Why a generic LOI template fails

The free template gives you headings: purchase price, closing date, exclusivity. It does not say what to put under them. So the buyer writes a number and the seller reads it as final.

Then diligence finds inventory that does not match the books, or an add-back that does not hold. The price moves. The seller feels ambushed because the LOI never said what the price was based on. That is a re-trade, and it usually ends the deal.

A good LOI defines the contested terms upfront, while both sides still like each other. If you want the full sequence around it, from NDA to wire, read my guide on how to acquire an ecommerce business.

What is binding and what is not

Get this straight first, because it shapes every clause.

Term	Usually binding?	Why
Purchase price and structure	No	Either side can still walk
Closing timeline	No	A target, not a promise
Exclusivity (no-shop)	Yes	The seller agrees to stop talking to other buyers
Confidentiality	Yes	Protects the data room and both parties
Costs of each side	Yes	Each party pays its own advisers and lawyers

Whether a clause binds depends on how it is drafted and your state. That is a lawyer question.

The seven terms that decide whether the deal survives

1. Build the price in layers

One number is not a price. A price is a build: cash at close, a seller note, and sometimes an earnout. Write all three out.

• Cash at close. What hits the seller's account on closing day.
• Seller note. The portion the seller carries and gets paid over time. In my deal process the seller typically carries 20-30% at 6-8% interest over 24-36 months.
• Earnout. Extra money tied to post-close performance. It only works when the metric is clean and measurable with no ambiguity about attribution.

If the seller wants all cash and you planned a note, you find out in week one, not week six. I compare the two financing routes in seller note vs SBA loan. If you are financing, run your debt-service math before you write a price into an LOI.

State the earnings figure the price rests on, and say whether it is SDE or EBITDA. A price quoted against the wrong metric can misrepresent the business by 20-40%, which is why I wrote up SDE vs EBITDA for ecommerce. For how I arrive at the multiple itself, see how to value an ecommerce business.

2. Pick asset purchase or equity purchase

In an asset purchase you buy the business's assets: the brand, listings, inventory, domain, supplier relationships. In an equity purchase you buy the company that owns them, including its history and liabilities.

An asset purchase is the common route in ecommerce, because you buy what you are paying for and leave old liabilities behind. An equity purchase can make sense when contracts or accounts do not transfer cleanly. Either way, say which one in the LOI. In a US asset sale both sides allocate the purchase price across asset classes and report it to the IRS on Form 8594, so the structure has tax consequences for the seller too. Your accountant needs to see this before you sign.

3. Define working capital

Working capital is the cash tied up in running the business day to day. If you do not define it, the seller can drain cash and payables right before close and you inherit a business that looks the same on paper and is short of cash in practice.

The LOI should say the business is delivered with a normal level of working capital, measured by a method agreed in diligence. You need the principle in writing, not the final number.

4. Say how inventory is treated

Inventory is the biggest swing in most ecommerce deals, and the most common place the books and reality disagree. Decide whether inventory is included in the price or paid for separately at cost on the closing date.

Either works. What fails is silence. Say that inventory is counted against what is actually in the warehouse or FBA, and that unsellable stock is excluded. Returns sitting in storage and SKUs with no active listing are the usual culprits.

5. Set exclusivity at 30-45 days

Exclusivity means the seller agrees not to shop the deal while you do diligence. My window is 30-45 days, which matches a normal diligence period. Shorter and you cannot finish. Longer and the seller carries all the risk while you hold all the options.

If you need more time, tie the extension to a named open item, not open-ended time. Sellers say yes to specific asks.

6. Scope the diligence and the timeline

"Subject to due diligence" tells the seller nothing. Name what you will review: monthly financials, platform data reconciled to the books, inventory, supplier terms, account health history, legal items. The full list is in my ecommerce acquisition due diligence checklist.

Then name the dates: when the data room is open, when diligence ends, and a target closing date. I plan on 60-90 days from first conversation to close. Deals that drag past 120 days usually do not close.

7. Say who does what after close

Include the transition: how long the seller stays available, what they hand over, and a non-compete covering the same category and platform. What happens after the wire is the subject of the first 90 days after buying a business.

How a tight LOI limits re-trade risk

Re-trading is when the price changes after the LOI. Some of it is legitimate. Some is a buyer using exclusivity as leverage. A tight LOI lets you tell them apart.

Red flag	What good looks like	Risk
Price stated with no basis	State the earnings figure and whether it is SDE or EBITDA	High
Inventory left undefined	Say how it is counted and what is excluded	High
Earnout with a fuzzy metric	Name the metric, period and who controls the books	Medium
Open-ended diligence scope	List what will be reviewed and the dates	Medium
No transition terms	Put the principle in the LOI, detail in the purchase agreement	Low

Write the rule down: the price changes only if diligence finds a material difference from what the seller provided. With the earnings number agreed upfront, any change has to point at a specific finding. That keeps buyers honest and gives sellers something to hold. My starting criteria are in what I look for when acquiring an ecommerce business.

A paste-ready LOI skeleton

Plain-language clause text, written out in full. The line under each clause tells you which number or name to add. Treat it as a starting draft for your lawyer, not a finished contract.

1. Purpose. This letter sets out the principal terms on which Buyer proposes to purchase the business from Seller. Except for the sections on exclusivity, confidentiality and costs, this letter is a statement of intent and is not a binding agreement to complete the purchase. You add: the legal names and the business name.

2. Purchase price. Buyer will pay a total purchase price made up of three parts: cash at closing, a promissory note from Buyer to Seller, and, if agreed, an earnout. The total price is based on the earnings figure Seller has provided for the trailing twelve months, calculated as SDE or EBITDA as stated in this letter. You add: the dollar amount of each part, the earnings figure, and SDE or EBITDA.

3. Seller note. The note will be repaid in equal installments over the term stated below at the interest rate stated below. Buyer may offset against the note any amount Seller owes Buyer because a statement Seller made about the business turns out to be untrue. You add: the note amount, rate and months.

4. Earnout. If an earnout applies, it will be paid only if the agreed metric, measured from reports both parties can access, reaches the agreed level during the agreed period. If it does not apply, this section is deleted. You add: the metric, target, period and payment, or delete the section.

5. Structure. Buyer will buy the assets of the business, including the brand, listings, domain, inventory, supplier relationships and customer data, and will not assume Seller's liabilities except those listed in the purchase agreement. You add: nothing, unless counsel recommends an equity purchase.

6. Working capital and inventory. The business will be delivered with a normal level of working capital, to be measured by the method agreed during diligence. Inventory will be counted before closing and paid for at cost on the closing date, with unsellable stock excluded. You add: nothing. If inventory is in the price instead, say so.

7. Diligence. Buyer will review monthly financial statements, platform account data reconciled to those statements, inventory records, supplier terms, account health history, tax filings and legal matters. Seller will open the data room within the number of days stated below, and diligence will finish within the diligence period stated below. You add: days to open the data room and the diligence length.

8. Exclusivity. From the date Seller signs this letter until the end of the exclusivity period stated below, Seller will not solicit, discuss or accept any other offer for the business. This section is binding. You add: the end date, 30-45 days out.

9. Price adjustment. The price may change only if diligence reveals a material difference from the information Seller provided, and Buyer will explain any change in writing, pointing to the specific finding. You add: nothing. This is the anti-re-trade clause.

10. Transition and non-compete. Seller will remain available after closing for the transition period stated below and will agree not to compete in the same category on the same platforms for the period stated below. You add: the transition and non-compete lengths.

11. Confidentiality and costs. Both parties will keep the terms of this letter and all shared information confidential. Each party pays its own costs. These sections are binding. You add: nothing, or reference your NDA.

12. Target closing and expiry. Buyer targets closing on the date stated below. This offer expires if Seller has not signed by the expiry date stated below. You add: the closing and expiry dates.

Not legal advice. I am an operator, not your lawyer. Have counsel review every clause, especially which sections bind, before you sign.

What to do next

Send the LOI inside the two-week window, and make sure every number in it is one the seller has already heard on the phone. An LOI should never contain a surprise. If you are choosing who runs the process with you, I compare the options in business broker vs M&A advisor for ecommerce.

On the sell side, see selling your business.

I share the deal terms and diligence findings I see each week in my newsletter.

Frequently asked questions