How Is A LOI Different Than A Purchase Agreement?


How is a LOI different than a purchase agreement? What should be included in both?

While a purchase agreement is a binding contract with rights and obligations for each party that contains all the terms and conditions of the transaction; a preceding Letter Of Intent (LOI) is often overlooked for its significance. Although non-binding a comprehensive LOI with the same deal points will benefit both the seller and the buyer.  When all major sales terms, key ancillary agreements and important conditions are negotiated and agreed on by both parties they are in a position of much higher degree of success and their true intention of moving forward on the deal. Some of the basic items of a typical LOI should contain purchase price and terms; assets covered and delivery date; due diligence period; closing date; investigation of the business; consulting arrangements with owner or key employees; confidential information; releasing of public information, expenses and conditions  to closing.

When a seller accepts an LOI with the desired deal points he has exercised his strength in an active market with multiple buyers and further reduce opportunity loss of other qualified buyers by removing the business off the market during the due diligence period. The buyer would reduce potential disagreements on open items and the need for renegotiation. And they both would reduce the chance of wasting precious time and incurred expenses. Having an experienced agent will guide you through the entire process, make recommendations and handle the negotiation on your behalf.

About The Author: 
<KC Choi founder of Power Business Solution, Inc. offers business brokerage services to both buyers and sellers in the Los Angeles and Orange County areas. His business team includes 15+ professionals (multi-lingual) with extensive experience and knowledge with business transactions.  KC can be reached by phone at 714-345-6774.

Watch for more blog posts / articles from me in the future!

Categories: BizBen Blog Contributor, Deal And Escrow Issues







  Helpful Resources To Assist In Selling And Buying California Businesses
William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Jim Thomas: Broker Specialist, Consultant - Fitness & Gym Industry

Jim Thomas is the well-known founder and president of Fitness Management USA, Inc., a management consulting and brokerage firm specializing in the fitness, health club and sports industry. He has over 25 years of experience owning, operating and managing clubs of all sizes.

Elizabeth McGovern: Escrow Services - San Francisco Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Joanne Weber, Broker: Preschool Specialist, Southern California

The Ryan Craig Company is in its 46th year as the recognized expert in Southern California, dealing exclusively in the sale of preschools, Montessori schools, day care centers, and private schools. Our extensive list of references speaks for itself. Phone Joanne at 818-760-3684 for more info.

Ralph Santos, Business Broker Specialist: Home Health, Hospice, Health Care

Using my MBA and my perseverance I will make things happen! I provide business brokerage niche services specializing in the hospice and home health care agency industry in the Los Angeles County or Ventura County areas. For either buying or selling assistance please phone or email me today.


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