What belongs in the letter before anyone tours twice
Asset versus stock. Real estate in or leased. Cash-free, debt-free. Peg method, not “customary.” Seller note or standby language if SBA is in the room. Who orders Phase I, the M&E appraisal, and QoE. What happens if a recognized environmental condition appears. LOI to close is the calendar sibling.
SBA 7(a) still sits in a $5 million box with a 10% change-of-ownership injection under SOP 50 10 8 (Source: SBA). An LOI that only works if a current-pay note is labeled “equity” will die in credit.
Binding versus non-binding
Exclusivity and confidentiality usually bind. Price, reps, and indemnities usually do not — until the purchase agreement. Do not grant a long exclusive if the buyer has no capital path. Do not skip exclusivity if you want the buyer to spend on a Phase I.
Phase I components generally stale after 180 days under All Appropriate Inquiries (Source: EPA / 40 C.F.R. Part 312). Time the study to the exclusive, not to a hope.
| LOI clause | Typical status | Why it matters on a plant |
|---|---|---|
| Price / structure | Non-binding | Still hard to reopen |
| Peg method | Should be specific | WIP and E&O |
| Exclusivity | Binding | Pays for diligence |
| Confidentiality | Binding | Protects the floor |
Why quote a 223-day median on an LOI page?
Because BizBuySell’s 2025 review put manufacturing at a 223-day median close (Source: BizBuySell). A 30-day exclusive on a plated, certified, union file is theater. Size the exclusive to the work.
What a manufacturing letter should refuse to leave “customary”
Working capital. Earn-out metrics. Treatment of customer-owned tooling. Who pays if Phase II is triggered. Whether real estate is in. Whether a seller note is standby or current-pay. Which employees are key. What happens to backlog deposits. “Customary” is how those fights reopen in the APA at a worse time.
Buyers who need exclusivity to spend on QoE and an appraisal should say how much they will spend and by when. Sellers who grant exclusivity should ask for a capital path in writing — pre-qual, not a vibe. The letter of intent guide is the owner. This noun is the letter.
The glossary will not draft your exclusivity. Counsel will.
Isolation
This noun is the letter. The asset purchase agreement is the later contract. The glossary and FAQ split them. Jason Taken is a business broker. Educational information only. Counsel writes the letter you sign.
When the fights are frozen on purpose, book a confidential intro call.
Exclusivity that matches the work, not the optimism
Plated files, union files, ITAR files, and files with a building 504 need longer exclusives than a clean job shop with a current Phase I. Ask the buyer to name the studies they will order in week one. If they cannot name them, they are buying time, not a plant. Require a drop-dead for the QoE kickoff and for the appraisal order. Exclusivity without milestones is a free option.
“We have a great relationship with a lender” is not a path. A pre-qual letter, a named 7(a) shop, or a fund’s process memo is a path. Ask for that path in the same email that attaches the letter. A CIM can preview the fights the letter must freeze — structure, peg method, exclusivity milestones — without drafting the letter. Letter of intent guide is the long treatment. Counsel writes the letter you sign. After those fights are ready to freeze, a confidential intro call is the conversion path.
What the letter is not
It is not the asset purchase agreement. It is not a CIM. It is not a capital path. Most economics stay non-binding. Exclusivity and confidentiality usually bind. Price, reps, and indemnities usually do not — until the purchase agreement. Do not grant a long exclusive if the buyer has no capital path. Do not skip exclusivity if you want the buyer to spend on a Phase I.
How it shows up: the fights a CIM should preview and the letter must freeze — asset versus stock, peg method, earn-out metric, standby versus current-pay, who orders Phase I and QoE, and what happens if a REC appears. Phase I components generally stale after 180 days (Source: EPA / 40 C.F.R. Part 312). Time the study to the exclusive. BizBuySell’s 223-day manufacturing median close is why a 30-day exclusive on a plated, certified, union file is theater (Source: BizBuySell).