Introduction

The Letter of Intent (LOI) is one of the most commonly misunderstood documents in international trading. Many beginners misuse it, send it at the wrong time, or believe it is legally binding. In reality, the LOI is a non-binding expression of interest issued by a buyer to show that they are serious enough to begin a professional negotiation with a seller.

The LOI does not guarantee a deal, but without it, most sellers will not provide accurate pricing or proceed to the following steps, such as SCO, FCO, or contract drafting.

This lesson will teach you exactly what an LOI is, when to use it, what information it must include, and how to write a professional LOI that suppliers trust.

3. Who Issues the LOI?



Only the buyer (or authorized mandate) can issue an LOI.

A broker cannot issue an LOI unless the buyer gives written confirmation and authorization.

LOIs must be on official company letterhead, signed, and stamped.

5. Why Sellers Ask for an LOI Before Giving the Final Price



Serious suppliers want to avoid:

• Fake buyers
• Time-wasting brokers
• Price shoppers
• Fraudulent requests
• Non-qualified inquiries
  
  

An LOI helps sellers filter real clients from noise.

Once the LOI is received, the seller can safely provide:

• SCO
• FCO
• Draft contract
• Shipment schedule
• Inspection terms

Common Mistakes in LOIs (and How to Avoid Them)

❌ Mistake 1: Sending LOI without company details

Sellers reject anonymous LOIs immediately.

→ Always include a complete company profile.

❌ Mistake 2: Copy-paste LOIs from the internet

These look unprofessional and outdated.

→ Use a clean, structured format (template below).

❌ Mistake 3: Asking the seller to disclose the POP before the LOI

This is a red flag. Serious sellers never show POP early.

→ POP comes after a contract or financial instrument.

❌ Mistake 4: Brokers issuing LOA/LOI without permission

This leads to blocklisting.

→ Only the real buyer or their mandate can issue an LOI.

❌ Mistake 5: No validity period

Professional LOIs must include a validity timeline.

→ Example: “This LOI is valid for 10 banking days.”

LOI TEMPLATE (Letter of Intent)

(Use on Buyer’s Official Letterhead)

Date:

To: [Seller Company Name]

Subject: Letter of Intent to Purchase [Product Name]

Dear Sir/Madam,

We, [Buyer Company Name], hereby formally express our intent to purchase the following product under the terms specified in this Letter of Intent.

Buyer Information

Company Name:

Registration Number:

Address:

Website:

Authorized Signatory:

Position:

Contact Email & Phone:

Product & Quantity

Product: [e.g., Urea 46% Granular]

Quantity: [e.g., 25,000 MT per shipment / 100,000 MT annual contract]

Specification: [According to Industry Standard / Seller Specs]

Packaging: [Bulk / 50kg bags / Big bags]

Delivery Terms (Incoterms 2020)

Incoterm: [FOB / CFR / CIF / DAP / DPU / DDP]

Loading Port:

Destination Port:

Shipment Schedule:

Payment Terms

Preferred method: [TT / ILC / SBLC / DLC / CAD]

Banking Information (optional)

Bank Name:

Bank Address:

Account Name:

Account Number:

Declaration

We hereby declare that our company is ready, willing, and able to enter into a purchase agreement under mutually acceptable terms.

This LOI is issued without prejudice and is valid for 10 banking days from the date of issue.

Sincerely,

[Name of Authorized Signatory]

[Position]

[Signature & Company Stamp]

10. LOI vs. ICPO vs. SCO vs. FCO – Quick Comparison

Understanding these differences prevents confusion and failed deals.

Conclusion

The LOI is the first step in moving from inquiry to serious negotiation.

Once you master LOI structure and timing, you can communicate professionally with suppliers and avoid beginner mistakes that lead to rejection.