What if a buyer pressures me to sign an LOI before I am ready?

Whatever the reason a buyer wants a letter of intent signed quickly, the document sets the frame for everything after it, so you are entitled to read it properly. Nothing here tells you whether to sign.

What the letter can bind you to

BDC says a letter of intent is not intended to be fully binding unless it expressly says so. It also says that, where provided, the letter creates binding obligations on one party or the other, particularly on confidentiality and exclusivity. Under an exclusivity clause, BDC says, the seller agrees not to solicit or consider other offers without first speaking with the buyer, for the period set out. Find that clause and the length of the period before anything else.

Why the price in it is not the end

Among the clauses BDC says a letter may include is a price range subject to amendment, with the final price determined only once due diligence is complete. BDC’s guidance for sellers adds that significant price adjustments typically occur during due diligence, and that anything not up to par gives a buyer an opening to press the price down. A rushed signature does not fix the price, but it can start the exclusivity clock before you have organized your financials, contracts and lease.

What to do with the time you are given

• Ask a lawyer to review the draft, and ask the buyer to hold the date while that happens.
• Ask for a shorter exclusivity period, or for one that ends if the buyer misses a due diligence date.
• Confirm which clauses are binding and which are not, in plain words in the document.
• Gather the records the buyer will request, so the due diligence period is spent on review, not on finding documents.

If the buyer will not allow time for a lawyer to read the letter, treat that as information about how the rest of the deal may go.