What a manufacturing letter must freeze besides the headline
Peg method. Inventory-count date. Customer-owned tooling treatment. Whether real estate is in — see should I sell the real estate with the plant. Who pays for quality of earnings and a Phase I on an All Appropriate Inquiries path. How exclusivity behaves if a report slips. If you are buying a manufacturing business, a letter that only prints a number is a hope.
Counsel drafts the binding line. This page is not that draft. APA versus SPA is counsel’s structure. Your job is novation, ITAR, lease, and key-employee dates.
IBBA Pulse Q1 2026 reported 83% of deals over $5 million had three or more offers (Source: IBBA). A sloppy letter loses the process.
How long exclusivity should live
Long enough for appraisal, Phase I, and QoE. Short enough that a stalled file cannot warehouse you. BizBuySell’s 2025 manufacturing median time to close was 223 days (Source: BizBuySell). That median is not your exclusivity. If the QoE kills $400,000 of EBITDA, the letter should already say the price moves on a stated formula or the deal dies.
| LOI exhibit | What it freezes | What it must not say | Who confirms |
|---|---|---|---|
| Peg + count date | Target NWC method and physical | “Customary working capital” | Both counsel |
| Real estate | In, out, or lease terms | A blended plant multiple | Broker + RE professional |
| Diligence payers | QoE, Phase I, appraisal | Silence until week of close | Both sides |
| Capital path | 7(a) box, standby, cash | A no-cash folklore close | Lender |
How not to write a letter a lender cannot finance
SBA 7(a) still caps at $5 million with a 10% injection under SOP 50 10 8 (Source: SBA). Seller paper counts as equity only on full standby and only up to half the injection. An earn-out does not fill that injection. Most lenders will not count it as DSCR. If concentration or a key consent is the open item, put a measurable earn-out in the letter. Do not use it to hide a multiple neither side believes.
Customer names stay late. The letter should not promise early calls that announce a sale. The FAQ index owns the question. The owner URL owns the exclusivity slip rules and the QoE price formula.
What if the quality-of-earnings report deletes a turn?
The letter should already say the price moves on a stated formula or the deal dies. Hoping the lender sees it differently is not a clause. Exclusivity should slip or die if a report is late. BizBuySell’s 223-day median is not your exclusivity window.
Customer names enter late, on a script. The letter should not promise early calls that announce a sale. APA or SPA belongs in the letter as intended structure. Counsel owns the choice. Your job is novation, ITAR, lease, and key-employee dates.
A letter that only prints a number is a hope. If injection, standby language, and the $5 million cap are fiction, you wrote a path no lender can finance. The FAQ index owns the question. The owner URL owns the exclusivity slip rules and the QoE price formula.
Counsel drafts the binding line — usually confidentiality, exclusivity, and sometimes expense allocation; not the obligation to close. This page is not that draft. Run exclusivity long enough for appraisal, Phase I, and QoE, and short enough that a stalled file cannot warehouse you. If a report is late, exclusivity should slip or die. If the QoE deletes a turn, the letter should already say the price moves on a stated formula or the deal dies.
IBBA Pulse Q1 2026 reported 83% of deals over $5 million had three or more offers. A sloppy letter loses that process. An earn-out belongs in the letter only with a measurable definition. APA versus SPA is intended structure, not a slogan. Novation, ITAR, lease, and key-employee dates need owners. Customer names stay late.
Who pays for quality of earnings and the Phase I should be frozen before anyone grants exclusivity. A seller who “already has a Phase I from 2018” still needs a current All Appropriate Inquiries path if the building is in. A buyer who writes a 7(a) letter that ignores the 10% injection and full-standby rules wrote theater. Model coverage on cash at close. Most lenders ignore the earn-out as DSCR.
If real estate is in, say so. If you are staying landlord, write the rent you already live. If customer-owned tooling sits in the cage, exclude it from the asset list and from the peg. Those three sentences prevent more close-week fights than a prettier headline price. Write them before anyone grants exclusivity. A manufacturing letter that skips the peg method, the count date, or the dirt stance is a restart dressed as paper. The owner URL walks the exclusivity slip rules. This FAQ only names the letter. Do not treat a term sheet as a close. Read the owner, then write the exhibits. Educational briefing only after that owner-URL handoff is read.
Jason Taken is a business broker. Educational information only. Confirm the binding line with counsel. After you read the owner URL, book a confidential intro call if the file is real.