Should I Include a Deposit in the LOI?
When taking place in an acquisition, you will first submit an offer which is generally placed in an LOI.
An LOI will include the basic terms of the deal. The most important metrics include price, timeline to close, and details on a deposit.
There are a few factors to consider when thinking of whether you should include a deposit.
Amount: The purchase price should be a factor. A small purchase price generally doesn’t include a deposit while a large one certainly does.
Time: The length of time until close matters. If closing is soon enough, a deposit probably is not necessary.
Exclusivity: If you are expecting to be the only one to transact on the deal, place a deposit in exchange for exclusivity.
Scarcity: If the possibility of losing the deal is high, then a deposit can help secure it.
Request(s): How much are you asking of the seller?
The amount of a deposit can range between typically $5,000 up to 10% and more. The deposit is applied to the purchase price. The deposit being non-refundable or refundable depends on if you’re gaining something and how much the seller is giving up, in which case it could be non-refundable. For example, if you are asking for training prior to close and for them to reveal their secret sauce, and open up a lot of proprietary.
Let JARBLY guide you with your next acquisition purchase to help you through the process.
Contact us for your next M&A acquisition opportunity:
Email – email@example.com
Phone – (800) 773-1523
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Jarbly is a leader in acquisitions with expertise in helping with listings, negotiations, LOI's, asset purchases, company purchases, and real estate purchases. JARBLY has access to high net worth individuals if you are on the sell-side and businesses that may be of interest to you if you are on the buy-side.