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Business loans for law firms

Finance your practice from the ground up, or just refurnish it.

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By

Rhys Subitch

&

Stacie Hurst

Updated

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Starting and growing a law firm while personally staying afloat can take a great deal of planning and effort. Once your practice is up and running, even simple changes can make hectic months even more chaotic. Reign in some of that mayhem by researching what type of financing best suits the needs of your practice before you commit. We’ll take you through the different types of business loans for lawyers, what to look out for, and provide you with guidance to move forward with confidence.

What financing options are available for law firms?

You can finance a law practice with a variety of options. Here are the top 6 to consider:

  1. Canada Small Business Financing Program (CSBFP) Loan. You can apply for these loans through a chartered bank, credit union or a caisse populaire. They are at least 75% backed by the Government of Canada. Your business must make under $10 million in revenue annually to be eligible for this program. Because the government will cover a large portion of these loans if you default, it’s easier to qualify for financing. These loans have much lower interest rates than private loans. You can use them to finance the purchase of a property or to fund your business like you would with a term loan.
  2. General purpose business loans.
    These fixed-term business loans are intended for any legitimate business use. You can get them from both online lenders or banks. If you’re unsure exactly how you’ll use the funds and want the flexibility to spend some on office furniture and some on staff payroll, for example, you can do that with a general purpose business loan.
  3. Invoice financing.
    Your law practice likely bills clients through invoices. Invoice financing could be a viable option if you have large invoices pending payment and could use a cash advance of the billed amounts.
  4. Personal loans.
    If you’ve just started your practice and are having a difficult time qualifying for a business loan, you may have better luck with a personal loan. You can use most personal loans for business expenses. Keep in mind you’ll need to track what you paid for closely if you plan to deduct the interest paid on the personal loan as a business expenses.
  5. Business credit cards.
    A credit card for your business can provide additional working capital to cover everyday costs of running a law practice. Or it could simply cover a large one-time purchase like new computers.
  6. Personal credit cards.
    Similar to the personal loan, a personal credit card may be a more reasonable option if your law firm is new and doesn’t qualify for a business credit card.

Compare business loans

1 - 3 of 3
Name Product Interest Rate Loan Amount Loan Term Minimum Revenue Minimum Time in Business Loans Offered
OnDeck Business Loan
OnDeck Business Loan
8.00% – 29.00%
$5,000 - $300,000
6 - 18 months
$100,000/year
6+ months
Secured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months with a minimum annual gross revenue of $100,000.

OnDeck offers fast and simple financing. Apply in less than 10 minutes with your basic business information and see your loan offers without hurting your credit score. Get approved within 1 business day, and choose your term, amount and payback schedule once approved.
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More Info
Merchant Growth Business Loan
Merchant Growth Business Loan
12.99% - 39.99%
$5,000 - $500,000
3 - 12 months
$10,000 /month
6 months
Unsecured Term, Line of Credit, Merchant Cash Advance
To be eligible, you must have been in business for at least 6 months and have a minimum of $10,000 in monthly sales.

Merchant Growth offers financing tailored to business needs. It specializes in providing capital based on future cash flows, but it also offers fixed solutions. Fill out an application within 5 minutes and get your funds within 24 hours.
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More Info
Loans Canada Business Loan
Loans Canada Business Loan
6.60% - 29.00%
$4,000 - $500,000
3 - 60 months
over $10,000/month
100 days
Unsecured Term
To be eligible, you must have been in business for at least 100 days, have a Canadian business bank account and show a minimum of $10,000 in monthly deposits ($120,000/year).

Loans Canada connects Canadian small business owners to lenders offering financing up to $500,000. Complete one simple online application and get matched with your loan options.
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More Info
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Representative example: Juliet takes over a legal practice

Juliet has been working for a reputable law firm for years and was recently given the opportunity to take over a small legal practice in a nearby town after the managing partner retired. The practice is well-established but old, and Juliet wants to revitalize it by renovating the offices, hiring a couple of lawyers who specialize in high-demand areas of the law and advertising the firm in nearby cities where it doesn’t currently have a lot of clients.

After putting together a plan and researching the costs involved, Juliet figures she’ll need around $50,000.00 to get her ideas up and running. She applies for a business loan from an online lender and is approved, thanks to the business’s solid credit history and strong financial position. Juliet signs the loan agreement and submits all the required supporting documentation, and soon the funds are deposited into the firm’s bank account.

Cost of renovating and expanding Juliet’s law firm$50,000.00
Loan typeBusiness loan (term loan)
Loan amount$50,000.00
Interest rate (APR)8.99%
Loan term4 years
Additional fees
  • Origination fee of 3.00% ($1,500.00)
  • Application fee of $0 (waived by lender)
Monthly payment$1,244.01
Total loan cost$59,712.48

*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.

How do I compare my financing options?

A large part of deciding what solution is best for you lies in what type best fits your situation. Short-term credit is generally better for smaller purchases that you can pay off quickly, whereas something like a full-blown loan is better for more costly needs. Once you figure that out, there are some basic qualities to compare. Ask yourself these 4 questions when comparing financing options for your law firm:

  • How much do I want to borrow?
    The amount you need will shape your options. Certain lenders may not be willing to loan the full amount you need, while others may try to sell you on a higher amount. It’s important to only borrow the amount you need. Overborrowing can lead to unnecessarily larger interest payments.
  • When can my firm afford to repay loan?
    Consider budget allocations for more than just recurring costs to better gauge your repayment limit. Once you know your firm’s monthly revenue, you’ll know what’s the maximum monthly payment you can afford. From there, you can determine how long you’ll reasonably need to repay the loan and pick a lender that offers that repayment term.
  • What’s the interest rate I’m being offered?
    If your law practice is more established, you may qualify for multiple offers and then be able to compare based on interest rates. For fixed-term business loans, interest rates greatly affect how much your loan will cost in the long run.
  • Am I comfortable with the fees and costs?
    Certain fees and costs may not be stated upfront. Look over loan agreements and ask lenders about late fees, prepayment fees, and other additional costs that may affect your payments down the road.

What do I need to apply?

You’ll run into different requirements for applying with different lenders. However, there are some common criteria that you’ll need to have:

  • Bank account statements and balance sheets. Your firm’s bank accounts will have monthly statements that lenders look at. In addition, lenders will want to see your firm’s balance sheet that shows cash assets versus debt.
  • Current asset documentation. What you already have can potentially be used as collateral and might soften eligibility requirements or get you a better interest rate.
  • Personal documents. Standard personal information and identifying documents are generally required to process a loan request.
  • Proof of your ability to repay the amount borrowed. This one is key. Your ability to borrow is directly proportional to your ability to make timely repayments in almost every case.

Mistakes to avoid when applying for financing as a lawyer

  1. Not having a clear vision and means of repaying the loan. You’re much more likely to receive financing if you can show the lender where you’re going and how getting there will help you pay back the loan.
  2. Not knowing the eligibility criteria. Credit and loan applications often require a good deal of paperwork and a hard credit check. Save yourself time and a potential hit to your credit by knowing the requirements and if you have a good chance of qualifying ahead of time.
  3. Having unrealistic expectations based on your law experience. Less experience may mean you won’t get a good rate or be able to borrow as much. Go in with the right expectations.
  4. Ignoring your current business assets. Know what you already have and how you can use it as leverage. Taking out a secured business loan could get you better rates.
  5. Not knowing your credit score. Knowing your credit score and what it can help you get is key. Many business lenders consider your personal credit score when evaluating your application.

6 honest tips to keep your firm running smoothly

  1. Learn how to work with your peers. Buying your fellow lawyers lunch or a beer once a month can go a long way. If you build a good reputation, you may get referred more clients.
  2. Send out your invoices in a timely manner. You can’t get paid if you don’t bill your clients. Make sure to go over your queue, what you’re working on, and what you’ve finished on a regular basis.
  3. Make a clear plan and follow it. Following a plan can keep you goal oriented and accountable for financial decisions.
  4. Budget for your living expenses. It would be unfortunate for your law practice to fail because you couldn’t support yourself. Be sure to allow for all recurring home expenses and incidentals.
  5. Look into student loan forgiveness. Your law degree likely came with a lot of student debt. There are both loan repayment assistance programs and loan forgiveness programs. Your area of law and time employed usually contribute to your eligibility in these programs.
  6. Overworking yourself will cause your personal life and work to suffer. Working yourself to the bone can cause burn out, not to mention damage personal relationships. Practice self care and listen when loved ones express concern.

Bottom line

You can find financing for various needs in the field of law. Visit our business loans guide if you want to assess your needs and compare your options. Comparing before you apply can save you money down the road. Just make sure to keep on top of your invoices and stay on budget.

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