What's everyone doing with deposits and LOI and how are you covering your ass if you put one down? Currently have LOI out, w/o deposit, edits came back w/ a 5% deposit which is short money in the grand scheme of things. But they want it to be non refundable after 60 days. Their thought was we should have a signed APA at 60 days, and I've only ever signed an APA at close w/ funding.
This is a service businsess w/ PM contracts in place, ~8 employees (3 of whom are key)., backlogged revenues, ect. So not a super straight forward deal and I anticipate schedules being a bit more complex than "N/A" for 90% of them.
For refence, about $1M transaction value.... 5% is short money, but the concern between the gap of the 60 days post LOI and close leaves a lot of questions..
Deposit with an LOI
by a searcher from Bryant University
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Don’t pay to peek.
Never make an earnest money deposit or sign a purchase contract—no matter how many contingencies are in it—before you and your advisors have analyzed the company, obtained an expert opinion of value and defined alternative terms of purchase.
If you doubt the wisdom of this advice, make an offer on a business you don’t really care about. Later, when you think you know what it is worth, try explaining to the seller why your offer must change.