LOI Terms Worksheet
The Clock After Signing (60 days)
- Day 1: Kick off diligence in writing and send the document request the same day the ink dries. Diligence Checklist
- Day 3: Full loan application in with the lender you already shortlisted; the bank's clock is the longest one. Lenders
- Day 6: Earnings verification engaged, scoped to what you are actually paying for. The QoE scope
- Day 36: Commitment letter in hand, or the honest conversation about extending exclusivity starts now. Compare the terms
- Day 42: Third-party consents moving: the landlord, the franchisor, every license the deal transfers. License Rules
- Day 51: Seller transition terms papered while you still have leverage. Seller Transition
- Day 59: Walk the funds flow line by line and verify every wire instruction by phone. Funds-Flow Worksheet
A typical shape to drag against your lender's own dates, not a promise about any deal.
LOI TERMS SUMMARY (for discussion with counsel; not a legal document) Target: small business under evaluation. Offer: $1,500,000, structured as an asset purchase. Seller financing: 10% of price ($150,000), on full standby for the life of the SBA loan. Exclusivity: 60 days from signing. Diligence period: 45 days. Transition: seller support for 3 months after close. Non-compete: 5 years. The clock after signing (60 days): - Day 1: Kick off diligence in writing and send the document request the same day the ink dries. - Day 3: Full loan application in with the lender you already shortlisted; the bank's clock is the longest one. - Day 6: Earnings verification engaged, scoped to what you are actually paying for. - Day 36: Commitment letter in hand, or the honest conversation about extending exclusivity starts now. - Day 42: Third-party consents moving: the landlord, the franchisor, every license the deal transfers. - Day 51: Seller transition terms papered while you still have leverage. - Day 59: Walk the funds flow line by line and verify every wire instruction by phone. Offer contingent on: - Financing: SBA 7(a) approval on terms acceptable to buyer - Quality of earnings supporting the reported SDE Questions for counsel: anything above that should move, and what this market's LOIs currently hold on each point.
The Working-Capital Peg
The Trailing-Twelve-Month Average
The peg: what a normal month holds, from the QoE or the monthly balance sheets.
Expected at Close
What the seller will actually deliver on closing day.
The Peg
$200,000
Receivables plus inventory, minus payables, at the trailing average
Delivered at Close
$150,000
The same math on closing day's balances
True-Up
$50,000
In your favor: the price adjusts down
The seller delivers $50,000 less than normal: the price adjusts down by that much, or the gap gets funded another way.
Sellers argue for a low peg and buyers for the trailing average. Both numbers here follow the cash-free, debt-free convention, and the peg's accounting method has to match the trailing statements or the fight just moves. The trailing figures come from the QoE work you scope.
Where the Give Is
Nine terms, and they do not move alike. A buyer who spends their goodwill on the ones that rarely move arrives at the ones that do with nothing left. This is our reading rather than a rule, and your deal can differ.
- Price · Rarely moves
- It is what the seller anchored on and what the lender's own valuation has to support, so it is squeezed from both sides before you get to it.
- Asset or stock · Rarely moves
- It decides who carries the old liabilities and how each side is taxed, so both sets of advisors argue it on principle. Asset deals dominate at this size for that reason.
- Seller note · Usually moves
- It costs the seller nothing today and it is the commonest way to bridge a gap between the price they want and the price the debt supports.
- Note on full standby · Moves for a reason
- Whether the note may be paid while the SBA loan runs is set by the program, not by the parties, once the note is counted toward the injection.
- Exclusivity · Usually moves
- It costs the seller time rather than money, and a seller who wants your offer taken seriously has little ground to refuse a working window.
- Diligence period · Usually moves
- Sellers grant it readily, and shortening it is the concession a competing buyer will offer, so treat a short one as a signal about the room rather than a favor.
- Transition support · Usually moves
- Most sellers expect to stay a while and many want to. Ask for longer than feels polite; it is the cheapest thing on this list.
- Non-compete · Moves for a reason
- State law caps how long and how wide one can run, so past the cap you are not negotiating, you are writing something a court will not enforce.
- Contingencies · Moves for a reason
- Each one is a right to walk away. Dropping one is the strongest concession you have, which is exactly why it should buy something named rather than goodwill.