The LOI decides who writes the purchase agreement.

Buyer’s counsel usually drafts the letter of intent and then the definitive purchase agreement. At this deal size that allocation is convention rather than a fight, and one sentence in the buyer’s own LOI records it: a line in the closing-and-documentation section giving the buyer the initial and every subsequent draft, with a delivery date.

Who drafts the purchase agreement in an SBA-financed acquisition of a small company?

Buyer’s counsel usually drafts it. The convention runs one way: the buyer prepares the letter of intent, and the party that prepared the letter of intent prepares the asset purchase agreement or stock purchase agreement that follows. Nothing compels that allocation. The LOI is where it gets recorded, and the sentence recording it is seldom contested.

The reason is structural. The buyer carries the lender, the closing checklist, the loan-approval calendar and a personal guaranty the lender will almost always require. The party carrying the conditions should hold the document describing them.

So the question is almost never “who drafts.” It is whether you put the allocation in writing before the broker offers you a form. If your LOI is silent, the default is whoever moves first, and that is frequently not you.

What does holding the pen on the purchase agreement actually buy the buyer?

Holding the pen buys three things: the baseline the other side must argue away from, control of the pace at which drafts move, and control over what the agreement silently omits. The third matters most at this size, because omissions are invisible. A missing indemnity cap reads like a clean document.

The baseline. Every term you write is one the seller must spend a round asking you to change. Every term you omit is one you must ask for. Same negotiation, opposite starting point. The drafter wins the terms nobody fights over, and in a small deal that is most of them.

The pace. Drafts arrive when the drafter sends them. If you wait on seller’s counsel to turn a markup while your lender waits for a signed agreement, you have outsourced your timeline to someone who does not share it.

The silent absences. Three of them do damage in a seller-prepared draft.

The assumed-liabilities boundary. In an asset purchase you buy the listed assets and assume only the listed liabilities. That binds you and the seller, not necessarily anyone else: most states recognize exceptions for de facto merger, mere continuation and fraudulent transfer, and tax statutes reach a purchaser directly. California makes a purchaser withhold enough of the price to cover the seller’s sales and use tax until a receipt or clearance certificate appears. New York makes a bulk-sale purchaser notify the tax authority at least ten days before taking possession or paying, whichever is first. Application: you need more than a schedule of excluded liabilities. You need a clearance covenant, a holdback sized to the exposure, and who-files-what. Consequence: a seller’s draft carries the schedule, not the machinery.

Law: Cal. Rev. & Tax. Code sections 6811, 6812 (failure to withhold means personal liability up to the purchase price); N.Y. Tax Law section 1141(c) and Form AU-196.10, by registered mail. Other states differ.

The indemnity article. Indemnity is a contract right: the seller pays you back for a false representation because the agreement says so, and there is no free-standing version. Four numbers do the work: survival, the cap, the basket, and where the money comes from. Deal-point studies report representation and warranty insurance in wide use and no-survival deals rising, but they cover far larger companies. At this size insurance is uncommon and no-survival is not your market. A judgment against a seller who has spent the proceeds is not security; a holdback or setoff right written in before closing is. Ask your lender how it treats setoff against a seller note.

Source: ABA Business Law Section, Private Target Mergers & Acquisitions Deal Points Study (2025) (63% of 139 studied deals referenced representation and warranty insurance; 41% had no survival, up from 30%). Those deals are materially larger; the figures describe that market, not yours.

The interim-conduct covenants. Interim conduct means how the seller runs the business between signing and closing. No formality in a 7(a) deal: the lender clears conditions inside that gap, and the seller still owns the company. Delaware’s Supreme Court affirmed a finding that a seller making drastic operational changes without the buyer’s consent breached a flat ordinary-course covenant, measured against that seller’s own past practice rather than industry behavior, and that the failed closing condition released the buyer. That result came from the words the parties used. Application: your draft needs a consent list and a condition tied to it. No new leases. No pay changes or hires above a threshold. No discounting to pull collections forward. Insurance maintained. Consequence: without both, a seller who runs the business down may have breached nothing.

Case: AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC, No. 71, 2021 (Del. Dec. 8, 2021). A far larger deal turning on its own covenant language; what transfers is the drafting.

There is a fourth, quieter one. Where goodwill attaches or could attach and your basis is fixed only by what you paid, both sides report the allocation on IRS Form 8594 for the year of sale, and the consideration — price plus assumed liabilities — is spread across asset classes by the residual method. With no schedule in the agreement, you argue basis and amortization after closing, against a seller who needs nothing from you.

Law: 26 U.S.C. section 1060; Treas. Reg. section 1.1060-1 (residual method of sections 1.338-6, 1.338-7); Instructions for IRS Form 8594.

You can read a document the other side prepared and catch every bad sentence in it. You cannot read the sentences that are not there.

The broker sent me a form LOI to sign. Should I sign it?

A broker’s form letter of intent is a seller-side document prepared for the seller’s convenience, and signing it hands away the drafting allocation before you have considered it. The same goes for the friendlier version: a seller who offers to have his lawyer prepare the purchase agreement as a courtesy. Decline both.

Marking up someone else’s draft looks like less work than writing your own. It is not. A draft built for the other side is not a document with a few bad clauses; it is missing whole articles. Rebuilding them inside a seller’s form is the same job in tracked changes, and each insertion reads as a buyer demand, not the baseline. Form LOIs also carry terms you would never propose: exclusivity without milestones, a broad non-refundable deposit, no working capital mechanism.

What sentence in the LOI settles who writes the purchase agreement?

One sentence, placed in the closing-and-documentation section of the letter of intent, settles it. Language of this kind does the job: Buyer or its representatives will prepare the initial draft of the definitive purchase agreement and all related documents, and each subsequent draft, and will deliver the initial draft to Seller on or before [date].

Two clauses: who drafts, and by when. What to get right:

• Say “and all related documents.” That pulls in the bill of sale, the assignment and assumption agreement, the seller’s consulting arrangement, the non-compete and the escrow agreement, where the economics leak.
• Say “and each subsequent draft.” Otherwise you write the first one and lose every version after it.
• Give a real date, not “promptly.” A date is a milestone; “promptly” invites argument later.
• Do not date the first draft before the inputs arrive. Entity records, the lease, key contracts and the lien and tax position feed it.
• State which paragraphs bind, and keep this sentence out of the non-binding carve-out if the date must interact with exclusivity.

I write the closing-and-documentation section before the price section, and I do not set a first-draft date until the lender’s closing checklist is in hand.

How does the first-draft date connect to the exclusivity article?

The first-draft date is the milestone that makes the seller’s exclusivity grant conditional, and it is what a buyer trades for a longer exclusivity period. Exclusivity is the seller’s contractual promise to stop talking to other buyers. Sellers resist long periods carrying no obligations, because that is a free option. A dated draft obligation answers the objection.

The trade reads plainly. The seller grants a longer no-shop. The buyer commits to deliver the initial draft by a stated date, and the seller may terminate exclusivity if the date passes. You commit to work you intended to do anyway. What you receive is a promise, not a guarantee: no-shop damages are hard to prove, and injunctive relief is discretionary.

Treat the binding parts of the LOI as binding. Where parties separately agree to negotiate in good faith in accordance with a term sheet, Delaware’s Supreme Court has held that obligation enforceable although the term sheet called its terms non-binding, and has allowed expectation damages. Rule: the promise to negotiate bound them, not the term sheet; a bare non-binding LOI generally does not commit you to its economics. Consequence: read exclusivity, expense and good-faith provisions as commitments.

Case: SIGA Technologies, Inc. v. PharmAthene, Inc. (Del. May 24, 2013).

Can holding the pen backfire on the buyer?

Yes. A first draft that opens at the extreme on every point at once is a drafting default, not a negotiating position. Uncapped indemnity, indefinite survival, every representation absolute, every condition in the buyer’s sole discretion, no materiality anywhere. A seller of a small company can read that as bad faith rather than as an opening bid.

The markup rounds it generates run on a calendar you do not control. Financial statements go stale. Landlord consents expire. And the SBA operating procedure applied to your loan is the version in force when the loan number issues, not when you signed the LOI. Stated as of September 2026: SOP 50 10 8 has applied since June 1, 2025, and SBA issued SOP 50 10 8.1 on August 14, 2026 under Information Notice 5000-880695, effective for applications receiving a loan number on or after October 1, 2026; files numbered through September 30, 2026 stay under SOP 50 10 8. An application in process is not a number. The governing version drives equity injection rules, the treatment of seller debt and your lender’s standards, and it changes. Confirm the current version, and how your lender applies it, with the lender rather than with any article, this one included.

Authority: SBA SOP 50 10, Lender and Development Company Loan Programs, version 8 (eff. June 1, 2025); version 8.1 (eff. Oct. 1, 2026); SBA Information Notice 5000-880695 (Aug. 14, 2026). Stated as of September 2026; confirm the version in force.

Where does taking the pen cut against the buyer?

Taking the pen means carrying the drafting work and delivering it on time, and both obligations land on the buyer alone. The seller’s counsel reviews. Your counsel builds. That is more work on your side of the ledger, and you carry it while feeding a lender, reading financials and planning a transition.

The sharper risk is the schedule. Trade a dated first draft for a longer exclusivity period, then miss the date, and you have handed the seller a clean reason to reopen terms or take calls again, using your own sentence.

Ask for the pen and you own the calendar. Own the calendar and you own the delay.

What should I do before I sign the LOI?

Before signing the letter of intent, insert the drafting sentence and fix a first-draft date you can defend from the lender’s checklist and the diligence you expect to receive. Then carry that date into the exclusivity article so the two provisions read together. Work in this order.

• Ask your lender for its closing checklist and which SOP version it expects to apply to your file.
• Open the closing-and-documentation section, or create one, and insert the drafting sentence covering every draft and all related documents.
• Set the date by counting forward from the day you expect the records, the lease and the lien and tax position — then add drafting time.
• Take the date into the exclusivity article: longer no-shop, terminable if you miss delivery.
• Tell counsel which three articles to draft first: liability boundary, indemnity, interim conduct.
• Check the state for successor liability and bulk sale rules, and size a holdback for them.
• If a broker handed you a form LOI, do not sign. Have your own prepared.

One sentence decides who writes the document you will live inside for years, and who decides what it leaves out. Write the sentence.