Letter of intent (LOI)

A letter of intent (LOI) is a document that outlines the preliminary understanding between two parties who intend to do business, signalling serious intent to proceed before a binding contract is signed. It captures the key terms, such as scope, price, and timeline, while usually remaining mostly non-binding.

Why it matters in B2B sales

The LOI creates momentum. It lets both sides commit to a direction and start groundwork, such as onboarding or planning, while legal finalizes the definitive agreement.

In large or complex deals it also surfaces misalignment early, before either party invests in a full contract, and it gives a champion something concrete to take to their stakeholders. Used well, it shortens the gap between "yes in principle" and signature, which is often where hard-won deals lose momentum and cool off.

Is a letter of intent binding?

This is the most common question, and the answer is: usually mostly not, but it depends on how it is written. The commercial terms in an LOI, price, scope, timeline, are typically non-binding, expressing intent rather than obligation. However, specific clauses are often made expressly binding, most commonly confidentiality, exclusivity (a no-shop period), and sometimes an agreement to negotiate in good faith. A well-drafted LOI is explicit about which parts bind and which do not.

LOI vs MOU vs contract

An LOI is closely related to a memorandum of understanding (MOU); the two are often used interchangeably, though an MOU tends to emphasize mutual understanding between parties while an LOI frames one party's intent to proceed. Both differ from a contract, which is the binding, enforceable agreement that governs the actual deal. The LOI is a stepping stone; the contract is the destination.

A concrete example

An enterprise buyer decides to go with a vendor but needs six weeks for legal review of the master service agreement. Rather than lose momentum, both sides sign an LOI confirming scope, pricing, and a target start date, with a binding confidentiality and exclusivity clause. The vendor kicks off onboarding immediately, and the definitive contract, once signed, simply formalizes what the LOI already outlined.

How it shows up in a modern proposal workflow

An LOI draws on the same deal facts as the proposal and the eventual contract, so it should not be retyped from memory. Cobl can generate the LOI from the agreed scope and pricing already captured in the sales proposal, keeping the terms consistent from proposal to LOI to final agreement.

That consistency is what makes an LOI safe to move fast on: when the numbers and scope in the LOI already match the proposal and will match the contract, both sides can commit early without fear of a mismatch surfacing at signature. For more on compressing this stage, see proposal automation: how to close deals 10x faster.