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One of the many secrets that prosperous entrepreneurs have for their success is their constant lookout for business opportunities. When good possibilities like joint ventures, project collaborations, business partnerships, or other lucky chances present themselves, they look into them right away. It is during these instances that you need to ready a letter of intent (LOI). It serves as a business proposal, professional application, or formal request to have an arrangement with another corporate entity, whether a small business or an established one. Not to mention, using rental or lease properties also needs such a document, considering that they can be classified as a business transaction. So, don’t waste time and draft one now with our relevant article and examples below!
A business LOI is a letter that is sent from an individual or organization to another person with the intention to get into a business transaction. Once the receiving party acknowledges the letter and engages in the expressed intention, they can proceed in making a legally binding agreement or legal contract. In one of Capobianco Law Offices’s web articles, it was pointed out that one of the many importance of an LOI is that it provides both the sender and receiver the time to do a test-run on the proposed business. Since the document is non-legally binding, either of the two can break away from the proposal if things do not go well during the trial.
Formal letters are never easy to compose. The writers of such documents need to balance technical writing with creative writing, which only means that its content must be easily understandable while incorporating a persuasive quality. To help you with those, here are some tips for making an effective LOI.
1. Give accurate information. Considering that LOI’s are business letters, every detail that you instill must be correct. A minor mistake will confuse the other party.
2. K.I.S.S. An LOI has to be short and simple, including only the most important particulars of your offer.
3. Hire a lawyer. Lawyers are experts in complying with legal standards, even with paperwork. Though it can be costly, doing so has numerous advantages.
4. Stay professional. It was established that an LOI has to be persuasive. However, you must not forget about its business-related purpose. Therefore you have to maintain the professionalism of your content’s tone.
Just like any other business documents, the business LOI follows both a standard formal letter format and content. With the writing tips already provided above, here’s an outline of the letter’s standard content.
Any form of letter should start with an introduction. For business LOIs, the introduction must consist of a brief statement of the problem and another statement on how your party can give the solution. In those statements, insert the basic information of the involved parties.
In this section, put the purpose of your letter and explain it briefly. If you are selling or buying a service or product, also expound the details of each, such as its price. Take note that other transactions, like sponsorship proposals, fundraising proposals, and other project proposals are still highly applicable.
Include in your letter the quick run-through of what will happen if your letter’s offer has been recognized and accepted. In other words, you have to provide a summary of your contingency plan. As mentioned above, the letter will be escalated to the making of agreement or contract. However, you have the option to do another activity on the business agenda.
In continuation of the presentation of your contingency stipulations, you have put into detail the future legal requirements. The said requirements pertain to the records that you will be using as a reference, such as profit and loss statements, invoices, and other useful documents in both you and the other party’s data inventory.
Before getting into an actual business with another corporate body, you have to go through many processes. Each process may include various agreements, including the non-disclosure agreement or data confidentiality agreement, which protects your entire undertaking’s content.
Make it known to the other party that the letter is nonbinding. This is important to give the other party ease of mind, providing them enough time to rethink their decisions in getting involved with your party. Because of it, you can build up their trust.
One of the most important elements in your LOI is the effectivity and the closing date of your proposed business deal.
An LOI should be at least three pages. The first page should summarize the entire proposal, while the other two should thoroughly explain the different aspects.
LOI’s are distinguished according to their purpose or intentions. They can be an LOI for jobs and careers, business transactions, foundation and grant funding, as well as educational and academic pursuits.
A letter of acceptance is a response to an invitation, offer, or proposal. Its main function is to notify the invitation, offer, or proposal sender on the receiving organization’s positive response.
The world of business is bombarded with bureaucracy. However, it was made as such to make sure that any undertaking and procedure will have a positive outcome. A good example of this is a business transaction where you have to produce an LOI before proceeding in making another set of documents. Thanks to this type of system, the LOI is considered very important paperwork in business. It marks the start of a good business relationship. If made according to its standards, it can be very effective in grabbing the golden opportunity to do a profitable business. But if made poorly, the maker will receive nothing more than wasted time, effort, and resources.