Law firm financing is a type of commercial funding geared specifically to law firms. Firms can access a variety of different kinds of loans to expand operations, manage cash flow during growth periods, or acquire a firm.
This guide will explain different ways to finance your law firm so you’ll be prepared to make informed choices, whether you need to borrow funds to invest in equipment, fund payroll, or fulfill other financial obligations.
Law firm financing benefits
The main benefit of law firm financing is that it accelerates business growth by providing law firms with the necessary capital to promote their business, improve cash flow, enhance client experience, and hire top legal professionals, among other growth-related plans.
Whether you are looking for different types of large business loans or types of small business loans, law firm financing can help you reach your goals and support growth. Take a look at some of the most popular benefits of law firm financing:
Improve growth prospects
Law firm business loans can provide the much-needed resources you need to scale your practice.
You can use loan funds to invest in marketing initiatives that target new clients, upgrade software systems, hire new staff, expand your services, move into a larger location, and take other steps toward expansion.
Boost your client experience
Law firm financing can help you improve your customer experience.
You can use financing to enhance customer-facing channels, or you can offer flexible payment options to your clients. These can include:
- Unbundled legal services
- Subscription-based models
- Fixed-fee billing structures
Flexible payment options are often an important deciding factor for consumers looking for legal help, so offering more payment options can help you secure more business.
Hire top legal professionals
The success of your law practice ultimately boils down to your legal talent. Whether you’re hoping to hire recent law school graduates or experienced professionals, salaries for talented employees come at a hefty cost.
Securing funding for law firms can help you employ top professionals in the legal industry. By securing quality talent, you can improve your firm’s reputation and attract more business.
Manage cash flow
Knowing where your cash flow stands is key to realizing both everyday profitability and future growth potential. The majority of law firms use reports to inform cash flow either monthly or quarterly, according to an annual report from BigHands.
How often you check on cash flow is up to you, but cash flow limitations can impede growth quickly. Fast access to capital is important to have on hand so you can take advantage of growth opportunities as they come. Fortunately, financing can help. By boosting your cash flow, your business will have more time to focus on what’s important.
Cover expenses
Law firms face many expenses that aren’t present in other industries. This includes but is not limited to:
- Bar association dues (for both state and local bars)
- Mandatory continuing legal education (MCLE) programs
- Malpractice coverage
- Malpractice premiums
- Litigation costs
These fees can quickly add up, which is why law firm loans can help ensure you have quick funding so your business plan doesn’t get pushed off track.
Options for law firm financing
There are many types of business loans that you can choose from for your law firm, including litigation funding, working capital loans, and business acquisition loans.
Law firms face unique financial challenges—from managing case costs during lengthy litigation to investing in specialized legal technology—that require tailored funding approaches aligned with their specific growth objectives and cash flow patterns.
Term loans
Term loans provide a lump sum that’s repaid with regular payments over time. As a result, term loans are ideal when you know the exact cost of a particular project.
Funding amounts and interest rates for term loans vary depending on your personal and business financial criteria. Loan repayment timelines also vary, as term loans can have short repayment periods lasting for around a year, or they can be long-term loans that are repaid over as long as 20 or 25 years.
This type of loan can be used to finance operating expenses, hire staff, acquire another business, refinance, and more. Term loans can sometimes come with large limits for well-qualified law firms, with some lenders offering a $20 million loan or more.
| Pros | Cons |
| Most are unsecuredYou get the entire loan amount up frontPayments won’t change if you get a fixed-rate loan | You have to go through a loan application process each time you need funding.You won’t qualify if you don’t have good credit or proof of incomeInterest starts accruing when you borrow, and you have a monthly payment to make each month |
Business line of credit
Business lines of credit are some of the most flexible forms of financing on the market.
When you apply for a business line of credit, your lender will approve you for a credit line and set a limit on how much you can borrow. You can withdraw funds from your credit line only as financial needs arise. You’ll only have to pay interest on what you borrow, and as you pay down your balance, funds will become available again.
Business lines of credit are ideal when you don’t know the exact costs of a certain project or if you need to cover ongoing operational expenses.
| Pros | Cons |
| You can borrow as neededYou only pay interest on the amount borrowedYou can withdraw funds again after paying them back | Interest rate may be variable, which is riskier than a fixed-rate loan Using too much available credit could hurt your credit score |
Cash flow financing
Cash flow financing takes the form of an unsecured loan to help you cope with capital shortfalls. You essentially borrow against anticipated future income to cover operational expenses or investments today.
Cash flow financing can be used for almost any expenses, and you should be able to get timely funding quickly. However, you’ll need to make sure your company generates enough cash flow to pay back the amount you borrowed.
| Pros | Cons |
| A quick and effective way to borrowLoans are flexible, and you can use loan proceeds to cover routine costsCovers gaps between other financing sources | Interest rates may be higher than on secured loansLoans are not meant to accomplish long-term goals You’ll need to meet the lender’s strict underwriting requirements. |
Equipment financing
Equipment financing involves borrowing to buy equipment and using the equipment as collateral. Modern law firms increasingly rely on that equipment financing can help acquire sophisticated technology infrastructure to retain or increase your competitive advantage, including:
- High-performance document management systems
- Specialized legal software subscriptions
- Secure cloud storage solutions
- Cutting-edge digital forensics equipment essential for complex litigation
This financing option also covers critical office assets such as ergonomic workstations, conference room technology, digital dictation systems, and comprehensive security systems that protect client confidentiality while improving operational efficiency.
| Pros | Cons |
| Affordable loan optionCan finance expensive equipment over timeEasier to qualify for than some other kinds of debt | The equipment secures the loan and acts as collateralYou can only use equipment loans to buy equipmentIt can take time to get loan approval as the equipment is valued |
Small Business Administration (SBA) loans
The Small Business Administration (SBA) offers many different funding programs through participating lenders. These loans can be found through private credit lenders as well as local banks and organizations.
SBA loans are a popular type of funding because they feature low interest rates, high funding amounts, long repayment terms, and can be used for a wide range of business expenses.
The only downside to SBA loans is that getting a small business loan
qualifying for this type of small business loan can be difficult. You’ll need good credit and at least 2 years of business history. Plus, you’ll also have to meet the SBA’s size standards, and you’ll need patience – SBA loans have a notoriously slow funding speed.
| Pros | Cons |
| Available from private lendersLarge amounts of funding are availableGovernment guarantees make rates affordable | Loans can be harder to qualify for The process of applying can take a long timeYou may need collateral for the loan |
Short-term vs. long-term goals for financing
Managing a legal practice requires you to distinguish between short-term and long-term goals. Long-term goals can include your vision for your firm, as well as law firm expansion. Once you identify how much and how quickly you want to scale up or where you hope to take your firm, you can work backward to develop a strategy.
Short-term goals include plans you’re looking to implement within the next year or less. This can include hiring staff, ramping up advertising efforts, or moving into a new office space.
Depending on whether your goals are long-term or short-term, a different financing type might work better to meet your needs
For example, term loans with lengthy repayment periods and regular monthly payments are better suited for financing long-term projects. Alternatively, working capital loans can be an ideal source of fast funding to cover immediate expenses.
Short-term loans can also be easier to qualify for and generally have faster approval times. The only downside is that short-term financing typically features higher interest rates.
Compare law firm financing solutions with National Business Capital
Law firm financing solutions can provide much-needed capital for your business, but you need to select the right one. Explore your options given your long-term and short-term goals to find the loan that’s right for you.
National Business Capital can help you find different options for financing your law firm. You can explore affordable loans that offer timely approval – submit a digital application to streamline the borrowing process and get the funds you need to move forward.
National Business Capital also has dedicated business advisors who can help you explore loan options and find the funding that’s right for you. Check out National Business Capital today to learn more.
Frequently asked questions
Requirements for law firm financing vary by lender. You’ll usually need proof of income and assets. If you’re financing certain kinds of purchases for your firm, such as equipment, you may need to meet additional requirements.
Law firm financing is targeted towards law firms. Sometimes, this financing is cheaper and easier to qualify for because lenders feel confident in the earning power of legal professionals.
The amount of capital that law firms can access through law firm financing varies depending on the purpose of the debt, the firm’s financial credentials, and the credit scores of the business and owners involved in the transaction.
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