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Business Letter of Intent: What It Is and How to Write One
A business letter of intent (LOI) is a formal document outlining the initial terms of a potential business deal. While not always legally binding, it signals serious intent and sets the stage for a future agreement.
Why Use a Letter of Intent?
A well-crafted business letter of intent (LOI) helps with the following:
- Clarify key terms before drafting a full contract
- Show commitment to a deal
- Facilitate negotiations
- Protect sensitive information through confidentiality clauses
- Secure financing or approval for transactions
When to Use an LOI
Use a business letter of intent when:
- Initiating mergers, acquisitions, joint ventures, or real estate deals
- Seeking investors or strategic partners
- Sharing confidential information usually when applying for a job also called a Letter of Recommendation
- Streamlining complex negotiations
Key Elements
A strong LOI should include:
- Introduction and identification of parties
- Overview of the proposed deal
- Key terms (price, timeline, contingencies)
- Confidentiality and exclusivity clauses (if needed)
- Signatures and date
Free Letter of Intent Template
Use a customizable free LOI template that includes:
- Contact details and header
- Intent and project summary
- Deal terms and timelines
- Confidentiality terms
- Signature lines
Tips for Writing an Effective LOI
- Be clear and concise: Use precise language
- Include all key terms: Leave no room for ambiguity
- Consult legal counsel: Especially for high-value deals
- Use a professional tone: Reflect your credibility
- Proofread: Avoid errors that can undermine your message
Final Thoughts
A business letter of intent is a powerful tool for shaping successful deals. By using a professional template, you can establish trust. Including all necessary details will protect your interests. These steps allow you to move confidently toward a binding agreement.
