Evaluating CIM
From CIM to signed LOI
Read the CIM critically, model the financing honestly, and put the terms that matter in writing.
A signed LOI whose price, structure, working capital, and exclusivity terms you’ve modeled, your lender has seen, and your attorney has reviewed.
- 01
Read the CIM like a buyer
The CIM is marketing prepared for the seller. Reconcile SDE to tax returns where you can, test every add-back, and note what it would cost to replace the owner. Turn every gap into a written question for the broker.
- 02
Model the financing under today’s rules
Build sources and uses: SBA loan, your equity, any seller note. Check your injection against total project cost, confirm with your lender whether a seller note can count (full standby for the loan term, capped at half the injection under SOP 50 10 8.1), and stress-test DSCR for a rate rise and a revenue drop.
- 03
Decide every LOI term, not just price
Structure, seller note terms, working capital target, diligence period, financing contingency, escrow, transition, non-compete, and exclusivity. Vague terms now get negotiated later with less leverage.
- 04
Get your attorney and lender to look before you sign
Have your attorney review the draft LOI and show your lender the proposed structure. Both are cheaper to involve now than after the seller has accepted terms your loan can’t support.
Watch out for
- Pricing off projections. Lenders underwrite historical cash flow reconciled to tax returns.
- Leaving the working capital peg undefined, which is one of the most common post-close disputes.
- Agreeing to a long exclusivity period without a financing contingency.
Templates for this stage
Free to download with a numanknows account, alongside the deal they’re for.
CIM review checklist
Read a Confidential Information Memorandum like a buyer, and turn every gap into a question for the broker.
LOI issue checklist
Every term to decide before you submit a letter of intent, and the blockers to clear first.
Letter of Intent (LOI)
Non-binding outline of proposed price and terms — the basis for negotiating and drafting the definitive purchase agreement.
See it in a deal
Next: From LOI to closing
This guide is for informational and educational purposes only. It does not constitute legal, tax, financial, investment, or lending advice, and is not a substitute for advice from a qualified attorney, accountant, lender, or other licensed professional.