For both lawyers and their clients getting financial help is at some point or another a major concern. The question that many solo lawyers and small law firms have to ask often is: how can I get the money I need? Law Firms have lots of expenses. You should anticipate spending between $5,000 and $15,000 on your law office before you begin seeing clients.
You’ll also have to budget for recurring expenses, such as software, equipment, and any expansion plans you might want to factor in as your practice grows. And don’t forget salary costs for office staff, either!
Here are the most common reasons Law Firms seek outside financing:
- Start a new Law Firm.
- Hiring employees.
- Buying or renting new office equipment: computers, phone systems, printers, furniture, etc.
- Cover costs of a long litigation process.
- Pay for advertisement.
Getting law firm financing is actually very similar to the business loan process for most small businesses. Here are some ways in which your law firm can get legal funding.
Litigation-Based Law Firm Financing
Law firms can access cash from lenders in a unique way that is not available to other kinds of small businesses. Some lenders—such as Baker Street Funding—will loan you money based on your anticipated court case wins or settlements. Basically, you’ll get an advance on the funds you hope to win as part of your clients’ court cases, and repay the loan based on the total you receive.
We’re huge proponents of U.S. Small Business Administration loans, also known as SBA loans. SBA loans are actually loan guarantee programs, which means that the administration helps small business owners get access to bank financing.
Bank loans provide a great avenue for law firm financing, since they provide you with competitive terms and interest rates, depending on the size of your loan and your credit history. Small businesses sometimes have a problem getting approved for traditional bank loans, given that they borrow less than most bank clients and have less of a proven business track record.
Short- and Medium-Term Loans
Bank loans typically take two to six weeks before you get a decision, which might take too long for your needs. Short- and medium-term loans provide you with fast access to cash—sometimes even within 24 hours of your loan application—and do not have tons of restrictions on when and how you use your loan.
Business Line of Credit
f you need access to cash periodically, a business line of credit might provide the perfect kind of law firm financing for you. A business line of credit isn’t quite like the other law firm financing options we’ve discussed, but this is its best advantage. Instead of pulling out a large sum of cash at once, paying off interest as you go along, a business line of credit lets you take out money when you need it.
There are many companies that offer these services, and guide both lawyers and clients. The important thing is to know how to choose well and know in advance the rights and possibilities of each one.
Each law firm, together with its clients, will always need financial support, which can be easily obtained in some of these companies and with the necessary conditions.