Best Financing and Loans Options for Law Firms
As a legal professional, you’re well versed in contracts and understanding the fine print. We know you’ll do your due diligence to determine what type of financing is best for you, and we’re here to help.
As you research loans for lawyers, in addition to traditional bank term loans, you might consider the following law firm funding options:
Business Line of Credit
If you’re looking for a law firm line of credit, consider a revolving business credit line. This type of financing behaves similarly to a personal credit card in that a lender approves you for a certain credit limit, and you can use the funds when you need them. You only pay interest on the amount you actually use. As you pay down your debt, your credit line increases up to its original limit.
If you’re looking for financing with competitive terms, have good credit and aren’t in a rush for funding, consider a loan backed by the Small Business Administration (SBA). The SBA guarantees a certain percentage of each loan. As a result, lenders are at less of a risk in the event of default.
So if you’ve been denied a conventional bank loan and are still searching for small business loans for attorneys, you might have luck with this type of funding. Maximum maturity for SBA loans include 10 years for equipment and working capital or 25 years for real estate.
Some popular types of SBA financing options include:
SBA Express Loans
The maximum loan amount for this type of funding is $350,000. You could be approved for funds in as little as 1 month. The maximum rate is Prime plus 6.5% for loans of $50,000 or less and Prime plus 4.5% for loans more than $50,000. As of December 2020, the U.S. Prime Rate was 3.25%
SBA 7(a) Loans
While the funding process for SBA 7(a) loans could take 90 days or more, you’re able to secure more funding than you would with an SBA Express loan: up to $5 million. Interest rates on 7(a) loans vary depending on loan maturity and loan amount. For instance, variable rate loans range from a base rate plus 2.25% interest on the low end to a base rate plus 4.75% on the high end.
The SBA also offers several options for lines of credit, referred to as CAPLines. Lawyers seeking financing could apply for a working capital CAPLine, and credit lines up to $5 million are available. Maximum interest rates for CAPLines are the same as 7(a) loans.
A short term loan is another type of business loan for lawyers and other professionals. This type of funding is typically meant to be repaid in less than 18 months. Longer term business loans of 1-5 years or more are also available.
Short term loans are commonly offered by alternative lenders and are a great option if you have a low credit score and need quick access to funds. Short term loan amounts are generally smaller than longer term loans, and these term loans usually have higher interest rates than their longer term counterparts. In the long run, though, a short term loan might actually cost you less in interest over the life of the loan because the debt is paid off in less time.
Here’s more info from our experts to help your small business thrive.
Accounts Receivable Financing
If your law firm is a business-to-business practice (i.e., business law), accounts receivable financing might be for you. Because you bill clients, you have invoices. And unless 100% of your clients remit timely payments, you have access to unpaid invoices. Rather than struggle to get through a cash flow gap or pursue a lawsuit against an indebted client, you can leverage your unpaid invoices with accounts receivable financing. Consider this option if you’re looking for quick access to funding. In some cases, same-day funding is even available.
With this type of funding, lenders advance you a percentage of the value of an invoice, often 70%-80%, holding back the remaining percentage until the invoice is paid in full. In these cases, the invoice serves as collateral for your advance. You pay a weekly fee until your customer satisfies the invoice balance.
Need to upgrade your computers, printers or copier machines? Whether you’re looking to lease or purchase new office technology, equipment financing can offer a solution for your needs. With equipment financing, the machines you obtain serve as collateral for your funding. Repayment terms often range 1-5 years, and generally don’t exceed the useful life of the equipment.
Discover Your Best Business Loan Options