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Key takeaways
- Signature does not prove the buyer has funded the purchase.
- Review binding status before signing or granting exclusivity.
- Keep commercial milestones separate from required operating authority.
Read obligations before relying on the label
A preliminary document can address confidentiality, exclusive negotiations, expenses and dispute terms as well as the proposed purchase. Identify what begins at signature, what remains conditional and how the parties can stop the process. Ask counsel to review the whole document, including its interaction with earlier agreements.
West Coast Health Law’s August 2026 practice-acquisition commentary discusses this mixture of terms. It is professional guidance, not a rule deciding every senior care transaction. (LOI discussion)
A fictional funding condition that survives signature
Suppose the buyer’s full project needs $800,000 and the buyer can commit $200,000 of cash. Another $600,000 still needs support. Signing an LOI does not supply that missing amount or make a proposed lender commitment unconditional.
Ask what evidence will establish the source, amount and conditions of that $600,000. A dated proof-of-funds review and lender review answer different parts of the question. This invented example does not set an equity requirement or show loan eligibility.
Separate the next three decisions
First, decide whether the proposed commercial terms justify further work. Next, obtain and review the evidence needed for funding, diligence and final documents. Before handoff, confirm all required authority and closing conditions. These activities may overlap; no universal legal sequence or deadline is implied.
SBA includes the LOI among documents to examine when buying a business and discusses professional diligence support. That list does not make the LOI an operating license or a guarantee of closing. (SBA buying-business section)
Read the full LOI guide for the detailed review agenda. Sellers can use the sale-process comparison to decide who will coordinate that work and who retains the decision.
For the next document set, use the APA definition to identify the agreement, its referenced attachments and questions to reconcile before relying on a proposed transfer.
Frequently asked questions
Is an LOI always nonbinding?
No. Wording, applicable law and conduct can matter. Have counsel identify what creates obligations and when. Do not rely on the document’s title or a general statement about how LOIs usually work.
Is an LOI the final purchase agreement?
It normally records preliminary transaction terms and a path toward further work. The actual document controls. Do not assume final purchase duties, funding or regulatory conditions are complete merely because the parties signed an LOI.
How long should exclusivity last?
There is no universal period supplied here. Review the work needed, dependencies, progress evidence, extension terms and termination rights with counsel. A stated deadline does not guarantee that a lender or agency will finish by then.
Where can I review the terms in more detail?
The linked senior care LOI guide covers price components, working capital, funding conditions, approvals and handoff questions. Use it to prepare a review agenda for your advisers, not as a signable legal template.
Sources
Sources are dated to distinguish current guidance from earlier publications. They support the identified facts; the transaction questions and examples are educational analysis.
- West Coast Health Law: negotiating a letter of intent, part 1 (2026). Retrieved September 6, 2026.
- SBA: buying an existing business or franchise (2026). Retrieved September 5, 2026.