SPA vs LOI
The SPA is the binding contract. The LOI opens negotiations. Buyers and sellers routinely confuse the two, especially when brokers push for a 'signed something' too early.
At a glance
| Criterion | SPA | LOI |
|---|---|---|
| Binding force | Legally binding once signed | Non-binding statement of intent |
| Stage in trade | After FCO, before LC opens | Kickoff, before FCO |
| Length | 10-25 pages plus annex | 1-2 pages |
| Parties | Buyer, seller | Buyer to seller |
| Payment clause | Full MT700 LC terms | Target payment instrument only |
Use SPA when
Use the SPA to close the trade - it is the master document every downstream operation references.
Get the SPA template →Use LOI when
Use the LOI to signal intent, share banking coordinates and unlock the seller's FCO.
Get the LOI template →FAQ
Can an LOI turn into an SPA?
No - they are different documents. The LOI leads to FCO which leads to a negotiated SPA.
Is an LOI enough to open an LC?
No. Banks open LCs against the SPA payment clause, not an LOI.