Your law firm has expenses, and if you invoice clients over a period of several months, you may not always have the cash on hand to cover those expenses. Fortunately, there are business loans for attorneys and law firms that can help bridge that gap. Here’s what you need to know about lawyers loans.
How Can Business Loans Help Lawyers?
Small business loans for lawyers can be used for a variety of purposes. You can use them to cover payroll during a slow period, refinance old, expensive debt, or expand your offices.
Business loans can, in fact, be used for any business-related expense.
Business Loan Options for Lawyers and Attorneys
There are actually several options when it comes to financing for your legal firm.
Financial institutions like banks and credit unions typically offer borrowers low interest rates, though they may have more stringent requirements to qualify.
The Small Business Administration offers several low-interest loan programs that can be used for real estate, equipment, and working capital. Note that you may not be able to use an SBA loan to refinance debt.
Line of Credit
Rather than receiving all your funds at once, a line of credit gets you approved for a set amount that you can borrow against. Repay it and borrow from your line as many times as you want. This is useful if you need money now, but aren’t sure how much more you might need down the road.
Business credit cards can help you easily make purchases for your law firm, and if you get a card with rewards, you can earn on what you spend. Just be aware that most have high interest rates, which you can avoid by paying your balance in full each month.
For those businesses without great credit who still need financing, short-term loans offer a solution. These do have higher interest rates, so determine how badly you need the capital.
If you regularly invoice clients, you may want to consider invoice financing, which allows you to borrow against the value of invoices, minus a fee.
How to Choose the Right Type of Loan for Your Law Business
With so many loan options and lenders, it can be hard to know which is the best option for your law office.
Compare interest rates across all products. The lower they are, the less you’ll spend to get access to cash. But also keep an eye out for additional fees, as some lenders charge them on top of APR.
You’ll also want to learn how to establish business credit so that you qualify for the lowest interest rates possible, thanks to your shining credit score!
What Does it Take to Qualify for Lawyer Loans?
All lenders have their own “secret sauce” for the criteria for loan eligibility, though most lenders heavily factor in your credit score. The higher it is, the better the rates you’ll qualify for.
But not all lenders solely focus on credit history. Others, like short-term lenders, look at other factors, like how long your law practice has been in business, or what your annual revenues are.
How to Apply for Lawyer Business Loans
Each loan application may vary slightly, though you can generally expect to be asked the same sorts of questions.
First, you’ll be asked about your business, including name, address, and time in business. You’ll also be asked personal details such as your name and Social Security number. You’ll also be required to list the loan amount you want to borrow.
Once you’ve submitted your application, you may get an instant decision, or it may take a few days. Once you’re approved, you will be given your loan repayment terms, including the interest rate you qualify for. Don’t be shy about shopping around, because you might find a lower rate elsewhere!
Once you find the offer you’re happy with, review your loan agreement, sign it, and you could see funds deposited into your business bank account in as little as one business day!
Your monthly payments will likely start the following month, so have a plan to automate those payments, if possible.
Nav’s Verdict: Business Loans for Lawyers
Don’t let a hiccup in your law business’ cash flow keep your business from growing. Whether you’re looking for the right refinancing offer or just need working capital to keep you chugging along between invoice payments, there are business loans and financial products to help you get there.
This article was originally written on May 11, 2021.