Letters of intent are statements written by individuals or organizations declaring their intention to commit to something, typically to use or purchase a product or service, but also for other things.
A letter of intent can be appropriate for situations where you are not able to produce a contract. It can add valuable strength and credibility to your claims in the business plan. For example, you might build a sales forecast on the assumption that certain key clients will make regular purchases, even though no contract exists; a clear letter of intent from one or more key clients or customers will help you build your business case.
Unlike a letter of reference, it is ok to provide a template or suggested wording for the writer of your letter of intent. Everyone you approach is likely to be busy - unless the person has written a letter of intent they are unlikely to know exactly what you are looking for. I suggest you put together a generic letter of intent to provide to those who commit to doing one for you.
Here are some key points to know about letters of intent. An effective letter of intent:
• Must include the date it was written and it should be fairly current.
• Will appear more credible if it is written on the writer's letterhead.
• Must come from a credible decision maker or person with the authority to honour promises made in the letter.
• Will be stronger if more specific, weaker if more general. In other words, it will help your business case if the writer states he or she will purchase an amount of goods or services within a specific time period. A general or vaguely written letter of intent doesn't provide a banker with a strong foundation on which to base his or her decision.
Dan Boudreau is Author of Business Plan or BUST! and hosts the RiskBuster Practical Business Planning Oasis at http://www.riskbuster.com
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