The term letter of intent, also considered as letter of interest, briefly describes the intent associated between two parties in a relative manner. There are varieties of letter of intents that are drafted, based on situations. They may include buying real estate property or indicating admissions to college through intent of acceptance of an offer in a formal way. The letter of intent can be issued for recipients of scholarships as well.
However, in a business, the term letter of intent or interest is drafted in the form of a proposal of deal between the two parties. Such business proposals may cover mergers and contracts, acquisitions and purchases. A letter of intent has no binding on both the parties, but do assist to clarify the various clauses of a deal. Many times it can act as a protection in the event of a deal getting terminated.
Letter of Intent Format
A typical letter of intent format given below reveals the readiness of one party to buy a business from another party. This letter is considered as a great method for communicating the intentions between two parties.
Sample text Format
155 Garrison Street
Glamorganville, Virginia State 77778
Steel Container Corporation Limited
155 Garrison Street
Glamorganville, Virginia State 77778
Dear Mr. Bill Stefan
Greetings of the Day
We have pleasure in submitting our letter of intent for purchasing your business, Steel Container Corporation Limited, its assets and inventories. The principal terms of the proposed business transactions as envisaged should be significant as follows.
We would plan to proceed the acquisition of Steel Container Corporation Limited including its other services and amenities located anywhere in 155 Garrison Street. It also includes logos, brand equity and brand, and lists of customers. Besides, we plan to acquire field as well as all office equipments and inventory. We would take it for granted that the existing outstanding debt of the company is $40,000.
As a part of consideration to this letter, we plan to offer a compensation of $500,000. The details are as:
- $40,000 in the form of deposit subject to execution of this purchase agreement
- $200,000 shall be paid after fifteen days of period of transfer
- Balance amount shall be paid in equal instalments every month in the first six months after closing
We would require that you stop shopping from any other buyers for a period, which not less than sixty days, to give us time to finalize and execute this agreement with due diligence. We also expect that you do not disclose our letter of intent to purchase your company. After execution of this agreement, we can make a press release jointly.
This is not to be considered as an official purchase agreement. All other conditions and terms of the proposed deal will be detailed in the Purchase agreement. This is subject to mutual negotiations and agreement between the two parties.
Upon selection as a potential buyer, we expect that from the date of selection to closing, it will not take more than forty-five days.
How to write a letter of Intent
The following are some of the tips that need to be followed while drafting a letter of intent
- Reasons for writing the letter of intent should be given
- Information about the job vacancy or business deal must be written
- Appreciating the company to which the letter of intent is sent, is important
- It is essential to make use of an appropriate business letter format
- Ascertaining the name of the correct person to whom the letter of intent needs to be written
- In order to ensure that the letter is read by the correct person, it is essential to avoid addressing the letter using generic names or titles
- It should be remembered that most of the provisions detailed in the letter of intent are not considered as starting point for negotiations of deal or binding in any manner
- The letter of intent is to be treated as a process of business negotiation
- There are some binding provisions, like no shop provision or agreement non-disclosure
- The letter of intent should relate only to the matter. It should be kept short
How to start a letter of intent
Here is how to start writing a letter of intent. The person should start this letter by introducing himself or herself and the reasons for forwarding a letter. If the letter of intent is meant for a job, it should be mentioned. He or she should express the desire to work with the company for which the letter is being sent. The specific field of interest related to the company, skills, awards, and achievements of the person, should be indicated in the letter of intent.
How to End a letter of Intent
The closing of the letter of intent is also important. The ending should be professional in nature. The words, Sincerely or Best, are usually written to conclude the letter of intent. If a printed letter is sent, there should be a handwritten signature along with the typed name of the person. Ending the letter of intent in such a manner will have good value.
Letter of Intent vs Cover Letter
A letter of intent is regarded as an overview of the background of the person writing this letter. It also reveals his or her interest in working for the company written to, irrespective of having an opening or not. On the other hand, a cover letter contains a resume, which is normally sent by the person who is applying for a job.
How long should a letter of intent be
The letter of intent should be short in nature. Besides, it should be effectively written summarizing the person’s complete deal or proposal. This letter, which can be extended to a maximum of three or four pages, should be in the form of a business letter. It is vital that the letter of intent must be forwarded on a professional letterhead of the person’s company.