Offers & due diligence
The Four Essential Stages of a Closing
The four stages between a buyer's offer and the wire, what happens in each, who leads it, and what you need to have ready.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 713 words
Every business sale passes through four stages on the way to closing: the letter of intent, due diligence, financing approval and the drafting of final agreements. They overlap in practice, but each has a different owner and a different way of going wrong. A seller who knows what each stage needs can keep all four moving at the same time instead of waiting for one to finish before starting the next.
It also helps to see each stage from the buyer's side. The buyer is deciding, at every step, whether the company is what it appeared to be and whether the deal still makes sense. Your job is to make that decision easy.
The four stages at a glance
The table shows who drives each stage and what is asked of you.
| Stage | What happens | Who leads | What you provide |
|---|---|---|---|
| Letter of intent | Price, structure and key terms agreed in principle | Your advisor and the buyer | Decisions on price, terms, timing and your transition role |
| Due diligence | The buyer verifies financial, legal and operating facts | Buyer's accountants, lawyers and managers | Documents, access to records, prompt answers |
| Financing approval | The lender approves and documents the loan | The buyer and its lender | Information the lender requests, usually through the buyer |
| Final agreements | Purchase agreement and related documents drafted and negotiated | Both sides' transaction attorneys | Review, decisions on open points, disclosure schedules |
Stage one: the letter of intent
The letter of intent (LOI) sets out the price, how it will be paid, what is included and excluded, the expected timetable, the length of any exclusivity period and your role after closing, such as a training period or a consulting term. Most of it is not binding, but it shapes everything that follows. Terms left vague in the LOI tend to be settled later in the buyer's favor, when you no longer have other buyers to turn to.
An advisor who is negotiating several LOIs at once can use that competition to settle more terms up front. Our answer on what happens after you receive a letter of intent covers the next steps in detail.
Stage two: due diligence
Due diligence is the buyer's investigation of the company: tax returns, internal financial statements, bank records, leases, contracts, customer and employee information and anything else that supports the price. It is usually the longest stage, and preparation decides its pace. A seller with a clean, organized set of documents ready before the LOI answers questions in days; one who assembles them on request loses weeks and gives the buyer time to find reasons to renegotiate. Expect questions to come in rounds; answering each round fully and quickly makes the next one shorter.
Buyers who skimp on this stage tend to regret it, and so do sellers, because problems found after closing become claims. Our answer on how long due diligence usually takes explains what drives the timeline.
Stages three and four: financing and final agreements
Financing approval belongs to the buyer and its lender, but it affects you directly. Lenders often want information only the seller has, such as equipment lists, appraisals or a review of the real estate. Buyers using SBA loans or conventional bank debt move at the lender's pace, and a seller note is sometimes part of the package. Ask early what the lender will need, and have it ready.
Final agreements are drafted by the transaction attorneys once due diligence is well advanced. The purchase agreement, disclosure schedules and any lease, note, non-compete or transition agreement all need your review. Make decisions promptly: drafts that sit unanswered on a seller's desk are a common and avoidable cause of delay. Both sides should finish this stage knowing exactly what is being bought, what is being paid and when.
How we keep all four stages on schedule
At MDR & Associates we negotiate multiple letters of intent at the same time, so the LOI you sign reflects competition. We screen buyers for the ability to fund before they see details, which reduces financing surprises, and we can help arrange SBA, conventional and seller-financed structures through our business financing work. A principal of the firm stays involved through closing. Our ten-step process shows where each stage falls, and you can contact us to talk about your timeline.
Where this fitsHow a business sale works, step by step →
Questions owners ask next
How long does it take to get from a signed LOI to closing?
It depends on how prepared the seller is, how complex the company is and how the buyer is financing the deal. Our engagements typically run three to nine months from engagement to funds wired, and the stretch after the LOI is often the most variable part. Organized records shorten it more than anything else.
Is a letter of intent legally binding?
Mostly not. The price and deal terms in an LOI are usually non-binding, but certain provisions, such as exclusivity and confidentiality, typically are binding. Have your transaction attorney review an LOI before you sign, because the exclusivity period limits your ability to talk to other buyers while it runs.