Reaching a signed Letter of Intent can feel like the hard part is over.
In reality, the period between LOI and closing is where many deals slow down, change shape, or fail altogether. This phase introduces diligence, financing, documentation, and coordination — all under time pressure.
Understanding where deals most commonly break down helps owners prepare for the realities of the process and avoid preventable mistakes.
The LOI Sets Direction, Not Certainty
An LOI reflects alignment — not commitment.
While it outlines key terms such as price, structure, and timing, most LOIs are non-binding. They assume that diligence and financing will confirm the buyer’s expectations. If those assumptions don’t hold, terms often change.
This doesn’t mean the LOI was misleading. It means the real work is just beginning.
👉 Check out: Price vs. Terms: How Deal Structure Impacts What You Actually Take Home
Diligence Exposes Gaps — Not Just Problems
Diligence is designed to validate what both sides believe to be true.
Deals often run into trouble when:
- Financials don’t reconcile cleanly
- Customer concentration is higher than expected
- Key processes rely too heavily on the owner
- Documentation is incomplete or inconsistent
These gaps don’t always kill deals, but they frequently lead to renegotiation or additional terms.
👉 Check out: How Preparation Impacts Business Valuation
Financing Can Introduce Timing Risk
Even when buyers are committed, financing can slow progress.
For transactions involving SBA or bank financing, timelines depend on:
- Lender underwriting
- Appraisals and third-party reports
- Final credit committee approval
According to the U.S. Small Business Administration, SBA-backed acquisition loans involve multiple review stages that can extend timelines if information is incomplete or assumptions change.
Understanding these mechanics early helps sellers set realistic expectations and avoid unnecessary frustration.
Momentum Matters More Than Owners Expect
Deals are sensitive to momentum.
Extended gaps between milestones can:
- Increase buyer second-guessing
- Invite new concerns
- Shift leverage
Prepared sellers who respond quickly and consistently help maintain confidence and reduce the likelihood of retrades.
👉 Check out: What Actually Happens When You Sell a Business
Working Capital and Closing Adjustments Are Common Friction Points
Many deals stall late due to misunderstandings around:
- Working capital targets
- Inventory valuation
- Closing balance sheet mechanics
These issues are rarely about bad faith. They’re usually about expectations that weren’t fully aligned early enough in the process.
Clear definitions and early modeling reduce last-minute tension.
Legal and Documentation Complexity Adds Pressure
As closing approaches, documentation volume increases.
Definitive agreements often involve:
- Representations and warranties
- Indemnification provisions
- Escrows and holdbacks
These elements protect both parties, but they can also introduce complexity and delay if not managed carefully.
👉 Check out: What Actually Drives Business Value
Why Prepared Sellers Close More Deals
Across most transactions, the pattern is consistent.
Deals that close smoothly tend to involve sellers who:
- Anticipate diligence questions
- Maintain organized records
- Engage proactively rather than reactively
Preparation doesn’t eliminate challenges — but it reduces the number of surprises and keeps discussions productive.
👉 Check out: How to Know When You’re Ready to Sell Your Business
Conclusion
The distance between LOI and closing is where transactions are truly tested.
Most deal failures in this phase aren’t caused by lack of interest, but by misalignment, preparation gaps, or process breakdowns. Owners who understand where deals commonly falter are better equipped to navigate this stage with confidence and realism.
Selling a business isn’t about avoiding friction entirely — it’s about managing it deliberately.
