How do you get a business loan for a law firm?

How law firm cash flow works

Law firm cash flow depends heavily on practice area. Hourly-billing firms (corporate, real estate, transactional) invoice monthly and collect on net-30 terms — a manageable AR cycle. Contingency-fee practices (personal injury, class action, employment) can go 12–36 months from case intake to settlement collection, creating very long days-sales-outstanding that bank statements dramatically understate relative to true economic value. Partner draw structures and quarterly or annual profit distributions create additional timing gaps between revenue recognition and cash distribution.

Working-capital lines for case receivable timing

A revolving business line of credit is the standard tool for managing AR timing in law firms. Hourly-billing firms draw to cover payroll and overhead ahead of monthly invoice collections; contingency firms use lines to fund case expenses — expert witnesses, medical records, court reporters, filing fees — ahead of settlement. Lines run $50K–$500K+ for established practices. Lenders underwriting contingency practices benefit from a case portfolio summary showing expected settlement timing and average settlement value.

Partner buy-in financing

Junior associates buying into a partnership — acquiring an equity stake — need financing structured against their anticipated income stream and the value of the equity being purchased. Term loans from $50K to $500K+ support partner buy-ins. The American Bar Association's business-of-law resources note that firm equity valuation methodologies vary widely across practice types, which affects the loan structuring process. Lenders evaluate the firm's revenue per partner, EBITDA, and the buyer's personal income history.

SBA 7(a) for practice acquisition and expansion

SBA 7(a) loans up to $5 million finance law firm acquisitions — purchasing a retiring partner's book of business, acquiring a smaller firm, or buying out a departing partner. SBA goodwill-inclusive financing is critical for professional service acquisitions where client relationships and the firm's reputation are the primary assets. SBA requires a 2-year operating history, personal guarantee from 20%+ equity owners, and evidence of profitable operations.

Technology and office buildout financing

Legal research platforms, practice management software, e-discovery tools, document management systems, and leasehold improvements for client-facing office space are capital investments that equipment financing or term loans can cover. IRS Publication 946 Section 179 applies to qualifying technology investments placed in service during the tax year.

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