Top reasons why lawyers may need a business loan
Running a law practice can be an expensive business. Clients expect professionalism, and to look credible you’ll need smart premises, reliable office equipment, and a team of efficient administrative staff.
You’ll need access to costly legal resources, and training and professional development for your legal team can be a considerable investment.
In addition, you’ll have to cover the cost of substantial premiums for your professional indemnity insurance, as well as tax instalments, rent or mortgage payments for your office, and other fixed costs like utilities.
A business loan could help you to maintain your cash flow and ensure you have the funds to meet all your expenses even during quiet periods, or when clients are slow to pay their bills.
It could also help you meet one of the biggest challenges for legal practices – attracting clients in such a highly competitive market. You could use the funds from your business loan to re-brand your legal business, run an advertising campaign, or invest in content marketing to build your authority and reputation online.
If you’re considering growing your legal practice, a business loan could help you attract lawyers with different specialisations, or to acquire and set up new offices to expand into a new geographical area.
If you are an unaffiliated lawyer, a business loan could give you the funds to buy into a legal practice.
What are the requirements for getting a business loan?
Getting a business loan can be easier than you think.
You can probably expect to be rejected by the big banks unless you have been running your law firm for many years, have a top-rate credit rating and collateral to offer. But there are plenty of alternative lenders out there willing to offer business loans to law firms.
Each lender will have their own criteria when it comes to things like credit rating, how long you’ve been in business, and how high your turnover is.
If you’re higher risk (e.g. if your credit score is low) you may still be able to get a business loan, although you can expect to pay a higher rate of interest to compensate for that risk.
The most important factor ALL lenders will look at is your capacity.
Lenders need to know that you will have enough cash – after all your expenses – to cover your loan repayments.
How to apply for a business loan
If you are applying to an alternative lender for a business loan, the process is usually quick and easy:
1Create a business case to check how much you can afford to borrow.
2Prepare your supporting documents – expect to be asked for:
3Choose your lender and loan product – be sure to shop around, because costs, terms and conditions vary. Be sure to find out about hidden fees and compare all the costs of each product, not just the interest or factor rate.
4Complete a simple online application form and upload your supporting documents. Most lenders will respond within days or even hours. Some will even give an on-the-spot decision.
Grow your legal practiceSee if you qualify
What options are available to lawyers?
There are several types of small business loans you could consider, to support or grow your law firm.
Unsecured small business loan
A short-term option, unsecured business loans are usually for between 3 months and 2 years.
You can use the funds for any purpose. Many lenders will let you set a repayment schedule to suit your trading patterns.
Business line of credit
A business line of credit is similar to an overdraft facility, giving you access to cash up to an agreed limit, often with the right to draw, repay and redraw funds as you need them.
You only pay interest on what you borrow, but there are often set up and admin fees.
Business credit card
Business credit cards are great for covering day-to-day expenses and making purchases, but unless you clear the balance each month the cost can be extremely high.
Before entering in to any business loan agreement, be sure to seek professional advice. It’s also important to ensure you understand all of the costs (including all fees). You can get a head start by using our business loan calculator.