Loans for Attorneys: 3 tips to get started
Attorneys didn’t spend years of training at law school to then be burdened with accounting and cash flow issues. But the reality is that attorneys – particularly ones that are just starting out – often are cash poor when they first begin practicing. Many of them are saddled with loans from their undergraduate studies and, later, their law degrees.
According to U.S. News and World Report, graduates of the top 25 law schools in the country leave with $150,000 or more in student loan debt. Naturally, that amount of debt will take some time to pay back. However, attorneys usually do quite well financially. Many of them start at firms and immediately make more than $100,000 per year. Eventually, some will want to start their own law practices.
Running a law firm involves more than just meeting with clients and practicing law, which is what attorneys train to do. With any business comes the challenges of overseeing the bills and the finances.
Whether you are a recent law school graduate or an experienced attorney, there are small business loan options:
- Business acquisition financing (loans for attorneys to pay for the purchase of an existing practice)
- Startup loans
- Commercial real estate purchases
- Expansion, improvement, and/or relocation of an existing practice
- Debt consolidation financing
Here is some financial advice for applying for loans for attorneys:
- Research the market
If you have recently graduated from law school and are looking start your own firm, the challenges may be substantial. First and foremost, you will have to get clients but won’t have existing customers for referrals, which is often how people find their attorneys. Research to see whether the particular area where you wish to practice is not already oversaturated with law firms.One thing to consider is looking to take over an existing practice. For instance, a successful sole practitioner may be looking to sell his or her practice when the children do not wish to take over the firm. An estimated 20 percent of the U.S. population is now over age 65, according to the Census Bureau. The Baby Boomers – even those who are working past 65 – won’t continue working forever. As they retire, younger attorneys will take over.Taking over an existing law firm could be the best bet. Fortunately, business acquisition loans are available.
- Write a solid business plan.
Whether you are an attorney, IT expert or dog groomer, having a solid business plan is critical to securing financing. The business plan provides a roadmap for success. Include a market analysis that examines if a particular area is already saturated with lawyers. If this is the case, it will be more challenging to be successful.The elements of an effective business plan include:
- Executive Summary: A one-page summary of the business. (It may be the only part of the business plan that an underwriter will read, so make sure it is the best it can be.)
- Business Description: Explanation of the firm.
- Target Market and Competitive Landscape: An objective analysis of the local market in which the firm will operate.
- Services: What kind of law will the firm practice – wills, estates, divorce, and real estate closings or something more specialized?
- Sales, Marketing and Promotion: Detail how you will promote the firm (website, mailings, social media, traditional advertising and p.r. activities, etc.).
- Management: One-paragraph bios of the partner(s) and key employees.
- Financial Data: Work with your accountant to provide tax documents, as well as a break-even analysis and cash flow projections, along with sample balance sheets and profit-and-loss statements.
- Investment: How much money will each partner invest in the firm? Lenders want to see that borrowers have “skin in the game.”
- Appendices: Logos, head shots and other visuals, including videos.
- Complete the loan application.
A common reason fora business loan rejection is because the applicant submits an incomplete loan package. Be sure it include tax documents (otherwise the bank will not process the application) and other supporting financial data. Failing to do so will lead to rejection.