By Phillip Mitchell, Founder & Chief Brokerage Officer, AIExchange.club

Typical ranges are as of October 2026, from the law-firm and court sources linked below. This is general information, not legal advice. Have a deal lawyer review any letter of intent before you sign it.

A letter of intent (LOI) is a short document where a buyer sets out the price and main terms they'll offer for your business, before the lawyers draft the purchase agreement. Most of it is non-binding. A few clauses, like exclusivity and confidentiality, usually are.

If you need one today, jump to the free LOI generator. Answer a few questions and download a Word document written for a SaaS, app or AI business, with the software-specific terms generic templates leave out. The rest of this guide explains each clause, which ones bind, and what to check if a buyer sends you one.

What is a letter of intent when you sell a business?

An LOI is the first written offer in a sale. It says who is buying what, for how much, how it will be paid, and how the next few months will run. It isn't the contract. The contract is the asset purchase agreement, which comes after due diligence and is where everything becomes binding.

Usually the buyer writes the LOI. If you're selling, the first one you see will be the buyer's, so most of this guide doubles as a checklist for reviewing it. Sellers sometimes send a short term sheet first to set the ground rules, and the generator below can produce either. From the buyer's side the same document is called a letter of intent to purchase a business.

A few documents get confused, so here's the order they appear in:

Indication of interest (IOI): a quick, non-binding signal with a price range. Often one email.
Letter of intent (LOI): a specific price and structure, a due diligence period and, usually, exclusivity.
Purchase agreement: the binding contract, signed at or just before closing.

The LOI sits in the middle of the sale. Our guide on how to sell a SaaS business shows where it fits in the full timeline.

Free letter of intent template generator for a SaaS, app or AI business

This tool builds a letter of intent template as a Word document you can edit. Pick whether you're the buyer or the seller, answer the questions, enter your email, and you can download the file straight away. We'll also email you a copy.

What you get:

A one-to-three-page LOI with numbered sections, signature blocks and an expiry date.
Software-specific terms: what transfers (domain, code, customer contracts, app store accounts, AI model keys), how prepaid annual plans are handled, an earnout or seller note if you want one, transition hours and a non-compete.
The non-binding and binding sections kept apart, so it's clear which clauses hold.

We store your email, whether you're a buyer or seller, and a price range. We don't store the other deal terms you enter. The document is a template, not legal advice: have a lawyer review it before you send or sign it, especially the binding sections.

What goes in a SaaS letter of intent

Here's every term a good LOI covers, what to put, and what a seller should watch for.

Term	What to put	Seller watch-out
Parties and business	Legal names, entity types, business name and website	The entity that owns the assets must be the one selling them
Structure	Asset purchase (the default for small software deals) or stock purchase	This changes your tax and what liabilities you keep
What transfers	Domain, code, customer contracts, app store accounts, trademarks, social accounts, AI model keys and prompts, support inbox	List exclusions too: cash, personal accounts, anything you're keeping
Price	One number, in dollars	"Subject to diligence" is normal, but ask what could change it
How it's paid	Cash at closing, escrow, seller note, earnout	The split matters more than the headline (see the example below)
Prepaid subscriptions	Whether the buyer gets credit for unused time on annual plans	Annual plans you've already collected cash for can become a price cut
Due diligence	Number of days, and what the buyer can inspect (billing data, analytics, code)	A defined scope stops requests growing every week
Financing condition	Whether the buyer needs a loan to close	A condition is a way out for the buyer. Ask for proof of funds
Exclusivity	Days you agree not to talk to other buyers	Long periods with no milestones lock you up
Transition	Weeks of support after closing and hours per week	Cap the hours and say what's paid
Non-compete	Years, and the product category it covers	Keep it to your product, not "software"
Closing and expiry	Target closing date and the date the offer expires	An offer with no expiry date can hang over you
Binding terms	Confidentiality, exclusivity, expenses, governing law	The rest should say it's non-binding

Price and structure

Most small SaaS and app sales are asset sales: the buyer takes the software, accounts and customer relationships, and your company keeps its own history. The LOI should say so. If it says stock purchase, the buyer is taking over the company itself, liabilities included, and your tax treatment changes. For how the price itself is set, see how we value a business on revenue and SDE.

How the price is paid

A $500,000 offer rarely means $500,000 on closing day. Part may be held in escrow, part paid later as a seller note ("seller financing"), and part contingent on results as an earnout. The LOI should name each piece, its size and its length. If you're the buyer, our guide on financing a SaaS acquisition covers where the money comes from.

Due diligence and exclusivity

Once the LOI is signed, the buyer checks your numbers, code and accounts. Law-firm guides often put the diligence period at 30 to 90 days and exclusivity at 60 to 120 days, with the whole stretch from LOI to closing at 60 to 120 days (Turley Law, July 2026). Exclusivity, also called a no-shop clause, means you can't talk to other buyers while the buyer does that work. It protects the buyer's time and money. Without it, a seller can use the offer as leverage with other buyers while the first buyer pays for diligence (Barnes & Walker).

Transition and non-compete

Buyers want you to stay around for a few weeks and not start a competing product. Both are fair in moderation. Put numbers on them: say, four weeks and five hours a week of handover, and a non-compete limited to the product you're selling. If you're selling an app, the store transfers also take planning, which we cover in how to sell an app.

Is a letter of intent binding?

Mostly no, with exceptions. Most LOIs are non-binding overall, but certain clauses are normally written as binding: confidentiality, exclusivity, who pays expenses and governing law. Price, terms and closing date stay non-binding and subject to due diligence (Barnes & Walker; Wiley Rein).

Clause	Usually binding?
Price and payment terms	No: subject to diligence and the purchase agreement
Structure and assets included	No
Target closing date	No
Confidentiality	Yes, and it usually survives if the deal falls through
Exclusivity (no-shop)	Yes, for the stated number of days
Expenses	Yes: each side normally pays its own
Governing law	Yes
Expiry and termination	Yes

The catch is that calling something "non-binding" doesn't make it so. The main risk, per Wiley Rein, is that a court imposes liability on a party when the parties never meant the LOI to bind them. In one New York case, a court held an LOI to be a binding contract because it covered all the material terms and used mandatory words such as "shall" and "will" (Freiberger Haber, 2019). So keep the wording clear: say which parts are non-binding, and say the deal is not final until a purchase agreement is signed.

A $500,000 offer, three ways

Two LOIs can show the same price and be worth very different amounts. Take a SaaS business making about $165,000 of SDE, with a $500,000 offer. This is an illustration, not a real deal.

	All cash	70/30 with an earnout	70/30 with a seller note
Headline price	$500,000	$500,000	$500,000
Paid at closing	$500,000	$350,000	$350,000
Paid later	$0	Up to $150,000, only if targets are hit	$150,000 plus interest over 24 months
What you can reasonably expect	$500,000	About $381,500	About $512,800 if the buyer pays every month

The earnout figure assumes it pays like the average one: sellers collect about 21 cents of each earnout dollar, based on SRS Acquiom's 2025 data (see our earnout guide), so $150,000 becomes about $31,500. The seller note assumes 8% interest, which works out to $6,784 a month. Both are made up for the example. The point is that the note is a promise to pay, not cash, and the earnout depends on a business that's no longer yours.

Escrow comes on top of all three. In SRS Acquiom's 2025 deal terms study, the median escrow was 9.0% of the price, which would be about $45,000 held back after closing (SRS Acquiom). That's covered in the asset purchase agreement guide.

If you received a letter of intent: what to check before signing

When the first LOI arrives, it's tempting to sign quickly, because exclusivity is the price of getting a deal started. Before you do:

Ask what can change the price. If it's "subject to diligence", ask for the list of things that would move it. A vague price is how offers shrink late.
Look at the exclusivity clause. Check the number of days, and ask that it ends early if the buyer changes the price or misses a diligence milestone.
Read the payment split, not the headline. Add up what's paid at closing and how much depends on the buyer.
Check for a financing condition. If the buyer needs a loan, ask for proof of funds or a lender letter.
Check how prepaid annual plans are treated. A credit for unused time can quietly cut the price.
Narrow the non-compete. It should cover your product, for a set number of years.
Cap the transition. Hours per week and number of weeks, and what's paid.
Look for an expiry date. If there isn't one, add it.
Compare offers on cash and risk. If you have more than one, put them side by side as in the table above.

Not sure what a fair offer looks like for your business? Start with our valuation tool so you know the range before an offer arrives. To get your business ready before then, see how to prepare a business for sale.

What happens after the LOI is signed

Exclusivity starts. You stop talking to other buyers for the agreed days.
Due diligence. The buyer reviews billing data, customer numbers, code and accounts. Respond quickly: delays kill deals. Our due diligence checklist lists what a buyer verifies, so you can have it ready.
Purchase agreement. The lawyers draft the asset purchase agreement, which turns the LOI terms into binding commitments.
Closing and transfer. Money moves, usually through escrow, and the accounts, code and domain transfer to the buyer. For the buyer's view of every step, with a timeline, see business acquisition steps.

If you're on the buying side, our step-by-step buyer's guide covers what happens before and after you submit an LOI.

Do you need a lawyer for a letter of intent?

For the generator output or any LOI you plan to send, yes, at least for a review. The document is short, but its binding clauses can be enforced, and the price and payment terms set what you collect. A lawyer who works on software deals can check the wording in a short review. Treat the template as a first draft.

Letter of intent FAQs

Can I write my own letter of intent?

Yes. There's no required format, and a clear one to three pages is normal. Cover the parties, what's being sold, the price and how it's paid, the diligence and exclusivity periods, which clauses bind, and an expiry date. Our generator does the formatting for you, and a lawyer should look it over before it's sent.

What is the next step after a letter of intent?

Due diligence, then a purchase agreement. The buyer checks your numbers and accounts during the exclusivity period, and once they're satisfied the lawyers draft the binding contract. See our asset purchase agreement guide for what's in it.

Can you back out after signing a letter of intent?

Usually yes from the non-binding parts, such as the price and structure, since the deal isn't final until the purchase agreement is signed. The binding clauses still apply: you can't share confidential information or talk to other buyers during exclusivity. A badly worded LOI can also bind more than intended, which is why the wording matters.

How long is a letter of intent valid?

Until the expiry date written in it, so always set one: an offer with no deadline can hang over you. Once signed, the exclusivity clause runs for its own period, which law-firm guides commonly put at 60 to 120 days.

What's the difference between an LOI and a purchase agreement?

The LOI is a mostly non-binding outline of price and terms. The purchase agreement is the full binding contract, with the representations, escrow, indemnification and closing mechanics. The LOI sets the deal's shape and the agreement finishes it.

Who writes the letter of intent, the buyer or the seller?

Usually the buyer. A seller can send a short term sheet first to set conditions, but the offer itself, with the price, comes from the buyer. As a seller, expect to review and negotiate the buyer's draft.

Next step: know your number, then list

An LOI starts with a price, so know yours first. Get a value range in a couple of minutes with the estimator below, or read what your SaaS is worth for the full method.

On AIExchange.club, listing is free and the flat 10% success fee is paid only when your deal closes. The deal room, escrow and in-platform contracts are included (see fees and pricing). We list businesses that are already making money.

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Letter of Intent for Selling a Business: What to Include, With a Free LOI Generator