This is standard in all transactions, and often something you do very early on, not uncommonly right at the initial contact with the seller or the seller’s advisor. stands for non-disclosure agreement. Down payment there are no universal rules or practices for this. Sellers naturally prefer a down payment while buyers prefer not to pay a down payment.
A reasonable starting point is that the down payment should only be paid for a so-called exclusionary period, which means that the seller may not sell to anyone else during this time. Proof of funds unlike real estate deals where you have a loan promise, business deals are something completely different. In the case of smaller companies, the vast majority of buyers will ultimately fail to secure financing, whereupon experienced sell-side advisors will immediately ask for proof of rounds.
Inexperienced buyers can sometimes resent being asked this question. In the case of larger companies, (ironically) funding is rarely an issue, and both sides are often represented by competent advisors, who are used to sending both proof of funds at an early stage. Declaration of intent (letter of intent) the abbreviation LOI, which stands for letter of intent, is often used. It can be used in different ways, and for different purposes.
In business transactions, it is mainly the heads of terms (read more below) that are interesting, which are often part of the declaration of intent. This is often a precursor to the main agreement or an indicative offer. If an interested party appears out of nowhere and is interested in buying your business and heads of terms. As an absolute minimum, it should contain some kind of indication of the bid, such as a number, a range, or a multiple, as well as conditions for the payment, e.g. Additional purchase price.
On the other hand, it is important to remember that in many cases it leads to a conflict regarding the additional purchase price, and that you as a seller rarely get the full amount according to the agreement. A reasonable starting point is to always avoid earn outs and seller reverses as far as possible, but it is not always that simple. Less attractive companies are often difficult to sell as they are, and it is not always the case that you succeed in closing the deal if you demand 100% cash on closing.