How to Write a Good Letter of Intent

by Timothea Xi

There are as many different letters of intent as there are professions. As such, there is no one LOI that can be all things to all people. Even within a specific field, the letter of intent can vary widely, notes the American Bar Association. Much will depend on the context of the proposed transaction. Virtually every aspect of the letter of intent is subject to alteration, but regardless of field, the basics of writing an effective LOI boil down to tailoring the letter to your audience and distilling the scope and essence of your project by highlighting key provisions.

Hit all the necessary components of a letter of intent. In a grant LOI, for example, include your summary statement, the significance of the proposed endeavor, an overview of your project and what sets it apart, the outcomes you hope to achieve and your credentials and budget for carrying out the activity. Round it out with appreciation to the reader and the intention of following up by a certain date. In a letter of intent to acquire a business, enumerate the tangible and intangible assets included in the acquisition, the purchase amount and any due diligence review to be conducted.

Provide a summary statement of what your letter is about and who the parties are. Confirm, for example, that [the Buyer] is interested in acquiring all the outstanding capital stock of [the Company, the Seller]. For a healthcare grant, state that [your department] is seeking funding to develop an innovative curriculum and include the amount requested over a given time period.

Furnish key elements, which may be unique to your particular field. For example, for an LOI discussing plans for future clinical cancer research, you would include scientific rationale, hypotheses, study design, treatment plan, correlative studies and statistical considerations. For a business acquisition LOI, discuss the definitive purchase agreement to be negotiated and how the terms of the LOI do not constitute the entirety of terms in the agreement and are subject to change. Include a deadline for signing the purchase agreement, any requirements of confidentiality and exclusivity, expenses and broker fees to be paid. Note that the LOI will be governed by the laws of your state.

Stay attuned to style, keeping it appropriate to your audience. For academic statements of purpose, realize that readers could potentially be reading hundreds of similar letters and are looking to be "grabbed" by some compelling bit of prose. Use vivid language, tell narratives -- within a brief space -- but avoid being gimmicky or glib. For a business venture letter of intent, maintain a formal manner throughout, denoting which party is the buyer and which is the seller and referring to the other party as "you" and yourself as "we" or "us," otherwise "all parties" in reference to both sides.

Watch out for legal implications of your letter. Separate out the binding and non-binding elements of a business letter of intent into two sections. Discuss under the latter heading provisional aspects such as the price, or the conditions necessary to satisfy before the conclusion of the agreement. In the section on binding terms, discuss the non-negotiable requirements of doing business, such as confidentiality and exclusivity, as well as when the binding terms will terminate.

Ask the other party to initial each page and sign the LOI, in the case of a business LOI, and request it be returned to you within a specified number of business days. Sign the letter yourself and submit the LOI to the intended party.

About the Author

Timothea Xi has been writing business and finance articles since 2013. She has worked as an alternative investment adviser in Miami, specializing in managed futures. Xi has also worked as a stockbroker in New York City.

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